Dollar depressed ahead of ADP report

This is certainly shaping up to be another painful trading week for the Dollar. Bulls were nowhere to be found during Thursday’s trading session, despite the release of yesterday’s somewhat hawkish Federal Reserve minutes. While policymakers expressed optimism over the U.S. labor markets, and believe that tax cuts could stimulate consumer spending, concerns over low levels of inflation lingered throughout the meeting minutes. 

Today’s main risk event for a tired Dollar will be the US ADP private sector jobs data, which is expected to have risen by 191k during December. Technical traders will continue to closely observe how the Dollar Index behaves before and after the ADP report this afternoon. Sustained weakness below 92.00 could open a path lower towards 91.60.

Currency spotlight: GBP/USD

The British pound appreciated against the dollar on Thursday morning after Britain’s service sector grew at a faster rate than expected in December. UK Services PMI increased to 54.2 in December, up from 53.8 in November, fuelling optimism that the UK economy accelerated in the final quarter of 2017.

While the current optimism may spark further upsides for Sterling in the short-term, the currency still remains at the mercy of Brexit developments. With Dollar weakness one of the key players behind the British pound/U.S. dollar (GBP/USD) currency pair’s impressive appreciation, it will be interesting to see how much higher the currency pair trades before bulls lose stamina.

Taking a look at the technical picture, the GBP/USD is bullish on the daily charts with the breakout above 1.3520 opening a path toward 1.3600. A failure of prices to keep above 1.3520 may result in a decline back to 1.3440.

Commodity spotlight: Crude 

WTI Crude oil started the New Year on an incredibly bullish note with the commodity currently hovering around its highest level in two and a half years, in part due to ongoing tensions in Iran.

It seems that the combination of geopolitical risk and optimism over OPEC’s supply cut rebalancing the markets, have turned sentiment bullish towards oil. While the current momentum suggests that further upside is on the cards, it must be kept in mind that U.S. Shale remains a threat to higher oil prices.

From a technical standpoint, oil is approaching the psychological $62.00 resistance level. A decisive breakout above $62.00 has the ability to trigger an incline higher toward $63.80.