A stronger U.S. Dollar is helping to pressure commodities and currencies this morning. Oversold conditions are contributing to the rise in the Greenback. There are no major U.S. economic reports today, however, three Fed members are scheduled to speak between 12:30 pm ET and 12:55 pm ET. They could move the markets if they make comments about the Fed’s future plans to taper its monetary stimulus. Earlier this morning, Fed member James Bullard helped strengthen the dollar when he mentioned in an interview with Bloomberg that the Fed could begin reducing monetary stimulus in October.
The stronger dollar and technical factors contributed to a sell-off in December gold today. After a strong surge on Wednesday following the Fed’s decision not to taper, gold ran out of buyers inside a retracement zone bounded by $1362.50 to $1379.37. In addition, price squared time at $1375.40. This Gann angle drops to $1370.00 today and should be considered resistance.
Breaking the 50% level at $1362.50 triggered a hard sell-off today, putting the market in a position to fall further. The next major downside target is a short-term retracement zone at $1333.45 to $1323.55.
November crude oil also finished lower today. Uncertainty about the strength of the economy and its effect on demand is weighing on prices. The stronger dollar also contributed to the weakness. A stronger dollar often leads to a drop in demand from foreign investors. Speculators continue to pare positions after Syria avoided a military conflict with the U.S.
Technically, crude oil is trading on the weak side of a retracement zone at $107.21 to $106.23. These prices are now new resistance. Downside momentum could mean a challenge of the recent bottom at $103.07 before the market finds support.
The EUR/USD finished slightly lower on Friday but is still in a position to post a strong gain for the week. Short-term technical factors could trigger a sell-off, but the long-term picture remains bullish since the Fed is uncertain about when it will begin tapering its monthly monetary stimulus. Investors may get a few clues later this afternoon when several Fed member are scheduled to speak.
Technically, the key Gann angle to watch is at 1.3504. Breaking this angle with conviction will be a sign of weakness and could trigger an acceleration to the downside. Short-term analysis suggests this market may retrace at least 50% of the rally from 1.3104 to 1.3568. This makes 1.3336 a potential downside target.
After rallying to 1.6162 earlier in the week following the Fed’s decision to refrain from tapering monetary stimulus, the GBP/USD has succumbed to profit-taking. The catalyst behind the sell-off is the weaker-than-expected U.K. retail sales report from Thursday.
This report came as a surprise, encouraging long investors to take profits after a substantial run-up. Speculators had been driving up the market in anticipation of the Bank of England raising interest rates sooner than expected. Today’s downside momentum suggests the sell-off may continue into next week.
Short-term indicators suggest an overbought market, but the Sterling is expected to resume its uptrend after reaching a value zone. With the Fed not likely to begin reducing stimulus until early next year, upside pressure should continue to support the Sterling.
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