The "dovish hike" powered stock market rally slightly cooled off during Friday’s trading session with investors turning cautious ahead of the anticipated G20 meeting. Asian shares were mostly mixed as participants weighed on the prospects of fewer US interest rates increases this year. In Europe, the defensive trading mood slightly pressured equities and the bearish contagion could limit gains on Wall Street this evening. An explosively volatile trading week is slowly coming to an end with investors turning their attention towards the G20 finance meeting which could offer some insights on how world leaders feel about key topics such as protectionism and global growth. With some discussions of currencies also being a possibility, the Greenback could turn volatile if leaders start to discuss the impacts of its resurgence since Trump’s presidential victory.
Gold elevated by Feds caution
Gold has staged a sharp rebound this week with prices springing above $1230 after the Federal Reserve signaled a more gradual pace of monetary tightening in 2017 then what markets anticipated. The "dovish hike" and caution displayed by the Fed simply disappointed many hawks consequently exposing the Dollar to downside shocks. Although bulls have exploited Dollar’s weakness to elevate Gold, gains could be limited in the longer term if the Fed readopts an aggressive stance. With sentiment towards the U.S economy firmly bullish, the Greenback remains supported consequently capping gains on Gold in the medium to longer term. From a technical standpoint, although prices are turning bullish on the daily charts, the $1240 regions could act as a checkpoint for bears to attack prices lower.
Currency spotlight – Dollar
The Greenback was under intense selling pressure this week after the Federal Reserve’s cautious attitude to future rate hikes left the hawks empty handed. Although the depreciation this week has sent the Dollar Index towards 100.20, prices may remain buoyed in the longer term amid the bullish sentiment towards the U.S economy. Much attention may be directed to how the Dollar Index reacts around the 100.00 psychological support which could be a real game changer for the bulls or bears.
Commodity spotlight – WTI
The rapidly diminishing optimism over the OPEC production cut deal has heavily dented buying sentiment towards Oil with the commodity struggling below $49.50 as of writing. Although U.S Crude stockpiles have eased from record levels last week, concerns still remain elevated over the high global inventories. With concerns lingering over the compliance of some OPEC and non-OPEC members to cutting production, the upside on oil seems limited. While some remain cautiously optimistic towards OPEC renewing their six-month supply cut to sustain the recovery in oil prices, the resurgence of U.S shale and lingering fears of members not following compliance could obstruct the extension. From a technical standpoint, WTI is heavily bearish on the daily charts. Bears remain in firm control below $50.
