MARKETS: Dollar steady… but for how long?

US Dollar held steady near a one-week high against a basket of major currencies Tuesday morning as bulls remained inspired by last Friday’s strong U.S. payroll figures.

While the Greenback is seen extending gains in the near term as renewed trade optimism supports risk sentiment and elevates U.S. Treasury yields, the medium- to longer-term outlook still remains in favour of bears.

Expectations remain elevated over the Federal Reserve taking a pause on rate hikes this year while the final effects of the 35-day government shutdown remain unknown. With the United States tackling headwinds in the form of trade tensions, global growth fears, fading fiscal stimulus at home and political uncertainty in Washington, the Dollar is vulnerable to downside shocks. Any signs of the U.S. economy experiencing a slowdown will most likely accelerate Dollar depreciation as its safe-haven status is questioned.

Focusing on the technical picture, the Dollar held onto gains Tuesday morning with prices trading around 95.90. The upside momentum is likely to send the Dollar Index towards 96.00 in the short term. A solid break and daily close above this level is seen opening a path towards 96.30 and 96.45, respectively. For bears to jump back into the game, prices need to trade back below 95.20.

GBPUSD Approaches 1.3000

The endless uncertainty over Brexit is poised to heavily influence the Pound’s trajectory this week.

Although the UK services PMI will be published Tuesday and the Bank of England meets on Thursday, investors are likely to be much more concerned with Theresa May’s trip to Brussels later this week. With the European Union not open for Brexit re-negotiations, is May’s trip doomed to fail with the PM returning home empty-handed?

With the Pound already spiking higher Monday on Brexit noise and likely to remain extremely sensitive to headlines, market players should brace for another volatile trading week for Sterling.

As regards the technical perspective, the GBPUSD seems to be edging lower on the daily charts with the 1.3000 psychological level acting as the first point of interest. A solid break below this point has the potential to instil bears with enough inspiration to challenge 1.2940. If 1.3000 proves to be reliable support, the GBPUSD is seen rebounding towards 1.3150.

Source: The Financial Mirror