The Dollar was back on its feet on Wednesday after being knocked over by the Federal Reserve’s surprise 50 basis point rate cut in the previous session.
Encouraging ADP NFP figures which showed private payrolls rising by 183,000 in February seem to have eased concerns over the health of the US economy in the face of the virus outbreak. Appetite for the Dollar is likely to increase ahead of the US jobs report on Friday as investors question whether the Fed will ease monetary policy despite strong economic fundamentals.
As of today, markets are pricing in a 90% probability of another rate cut when the Fed meets in March and a 44.5% of another cut in April. Should these predictions become reality, the Dollar is likely to weaken in the medium to long term due to the narrowing interest rate differentials between the Fed and other global central banks.
Focusing on the technical picture, the Dollar Index is staging a rebound on the daily charts with prices trading around 97.48 as of writing. An intraday breakout above 97.80 could open the doors back towards 98.50. Alternatively, if 97.80 proves to be reliable resistance, the Dollar Index could descend back towards 97.00.
Gold buoyed by rate cut bets
A sense of unease over how badly the coronavirus outbreak will hit the global economy should influenced Gold’s outlook this month.
The precious metal received a welcome boost in the previous session thanks to the Federal Reserves emergency interest rate cut. Speculation over the Fed and other global central banks easing policy should push Gold higher due to its zero-yielding nature.
General uncertainty and fears over the global economy are poised to accelerate the flight to safety – ultimately bolstering appetite for Gold.
In regards to the technical picture, prices are bullish on the daily charts. A solid breakout above $1660 could encourage an incline towards $1690 and $1700. Sustained weakness below $1660 could open the doors back towards $1620.
Oil more concerned with demand-side factors
All eyes will be on the OPEC meeting on Thursday which is expected to conclude with the cartel initiating deeper supply cuts. While such an outcome could create a temporary floor and even push oil prices higher, the upside will most likely be capped by demand side factors. For as long as the coronavirus outbreak remains a major market theme, fears around falling demand for fuel will leave oil prices depressed.
Focusing on the technical picture, WTI Crude is under pressure on the daily charts. Sustained weakness below 49.50 may open the doors back towards 47.00 and $46.50.
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