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USD Continues to Struggle Ahead of the Consumer Sentiment Data
12.08.2022

The price of the US Dollar continues to fall after being pounded by further negative economic releases. The US Dollar Index declined to 105.10 this morning, which is slightly higher than the lows seen yesterday. Yet, the index remains within the lowest price range we have seen since April of this year. The fundamental picture will continue to develop today as the US will announce its Preliminary Consumer Sentiment Index which is deemed to have the ability to create volatility.

Markets are also paying close attention to the British Pound which was partially supported by the announcement of the country’s monthly Gross Domestic Product. The GDP figure declined by 0.6%, which, technically speaking, is not positive for the economy, but at the same time, is much better than the previous predictions which ranged between -1% to -1.2%. So far, the Pound has not responded with a significant price movement but investors will continue to monitor the asset throughout the day.

The stock market saw a stall in the recent bullish trend which we have seen over the past month and more specifically this week. All three main US indices declined but no major volatility was observed. The oil market, on the other hand, continues to see volatility and the price gain for the second consecutive day. Investors are slightly uncertain by the mixed opinion within the market as the Organization of the Petroleum Exporting Countries (OPEC) and the Energy Information Administration (EIA) both give completely different signals.

Crude Oil

During yesterday’s trading session, the price of oil increased by 2.60% - the highest increase within a single day that we’ve seen since July 18th. Based on most wave theories, the price is still technically within a downward trend as it has not yet crossed the previous wave. Additionally, its current price action measures lower than the downward trend seen between July 29th and August 4th.

USOUSD - 12.08.2022.png Crude Oil 30-min price chart on August 12th.

Nonetheless, the price movement is still significant and traders will be keeping an eye on it to see if the asset is able to maintain momentum. The price movement this morning has lost momentum falling into a very small retracement, but this also gives an opportunity for investors to see if the price breaks out of the retracement into a further price high.

The price movement of crude oil is being influenced by multiple predictions and comments from different organizations within the industry. Unfortunately, each side seems to be painting a different picture. OPEC has advised that demand is at risk and may potentially decline to a level where supply may overtake demand. On the other hand, the EIA has advised that demand will continue to increase, and Goldman Sachs has also kept their stance advising that Oil will at some point rise above $100 again.

This morning, Christof Ruehl, a well-known energy markets expert, has advised Bloomberg that the price of oil has the potential to decline as low as $80 but also may again increase to levels previously seen. According to Ruehl, the price will depend largely on China and other developments in the market. He also advised that it's difficult to be certain about the price due to the current scenario around the globe.

GBP/USD

The price of the GBP/USD pair is not seeing a major reaction from the release of the UK’s Gross Domestic Product, nor from Federal Reserve comments. The market will be looking at the reaction and volatility levels once the US trading session opens and more investors are introduced into the market.

Currently, the price seems to be mainly being driven by the movement of the US Dollar, which appears to be similar in other USD currency pairs. On the charts, we can see that the USD has shed a reasonable amount from its value but has also hit a major resistance point which can be seen at the 1.2258 level on the GBP/USD.

GBPUSD - 12.08.2022.png GBP/USD 1-Hour price chart on August 12th.

Other than the UK’s GDP figure which came in at -0.6%, the asset is also being influenced by recent comments made by Ms. Mary Daly, who is the head of the San Francisco Federal Reserve. Ms. Daly advised that she still expects a 75 basis point increase in interest rates during the September meeting of the regulator. In addition to this, she advised that the regulator has “not claimed victory over inflation”, she continued to explain that inflation remains high and may still increase over the next coming months and possibly early 2023.

Investors are also slightly cautious about Ms. Truss, the leader of the election campaign for the next Prime Minister. She has recently repeatedly advised that she may empower officials to have the option to overturn the Bank of England’s decision on the country’s monetary policy if it will endanger economic development. This, of course, is something that has not been seen in many decades and caused a negative reaction from most economists. The bank’s chief economist, Mr. Pill, advised that the independence of the regulator is important because it can make tough decisions on monetary policy, unlike governments that are mainly driven by short-term political interests, popularity, and votes.

Key Takeaways

  • The US Dollar remains under pressure from economic releases.
  • Preliminary Consumer Sentiment Index to be released today.
  • Crude oil increases but gets mixed signals from the market.
  • The UK’s economy is still in the decline but performs slightly better than expected.
  • UK PM candidate shocks THE market with comments about the central bank’s independence.
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