The USD continued to dominate yesterday as we saw the greenback close in the green for the third trading day in a row. The USD Index, a measure of the strength of the USD against a basket of major currencies, breached north of 101 after finding support at 100 in Fridays trade. The GBP bucked the trend towards the end of the day which saw the USD Index drop off its best levels as the GBPUSD gained 100 pips on the Brexit vote not passing through the House of Lords for the second time, which has taken pressure of the GBP bulls as the Brexit fuse remains unlit.
In commodities, crude oil continues to range at the 54.50 mark as no clear direction is evident while gold also began to tighten as we saw bulls unable to break above 1240 as in an intense game of tug of war which appears to favor the bears as the correlation between a higher USD and a lower Gold price begins to return to normal. For now, bears seem to have regained the edge as we see resistance being fortified lower and lower with 1235 the new resistance for bulls to overcome if they wish to test the illusive 1250 level.
The strength in the USD was supported by FOMC members taking the podium and reiterating their view that at least three rate hikes would be appropriate in 2017 but none have committed as to when the kick off will occur. Currently markets have priced in a March lift off as we see the USD squeezed higher in anticipation of tonight’s FOMC Meeting Minutes which will, depending on its content, either see the USD bull proved right or the USD bears will have some respite after a long battle. The minutes will summarize the last FOMC meetings finding, and traders will be able to gauge whether the March lift off is on or not. A more hawkish report will see the USD strengthen as more jump on the March rate hike bus while a report indicating a delay of rate hikes to later in the year is likely to see longs unwound aggressively as bulls take profits and bears jump on for a relatively cheap ride down.