The Dollar Index found comfort within a tight range with 96.00 acting as a tough support during trading on Friday ahead of the heavily anticipated US CPI report that may offer clarity on the health of the US economy. Optimism over a potential US rate increase before the end of 2016 has gradually built back up with the ever improving domestic economic data provided a compelling reason for the Federal Reserve to take action. Last week’s NFP pointed to US labor force resilience in a time of global instability while the Beige Book report also showed a healthy expansion from mid-May to end of June. It seems that the domestic prerequisites for a probable US rate hike have been achieved and an impressive CPI report today could reinforce this idea consequently strengthening the Dollar.
Investors may also direct their attention towards the retail sales report which could offer a rough idea on consumption and GDP in the US economy. A figure that exceeds expectations could provide the Dollar Index bulls the foundation needed to bounce above the 96.00 support towards 97.00. On the other hand a disappointing retail sales report signals a decline in consumption and could open a path below 96.00 on the Dollar Index. It should be kept in mind that although US data has repeatedly beat expectations, the persistent Brexit uncertainty and unstable global landscape could still obstruct any efforts taken by the Fed to take action.
WTI Crude under pressure
WTI Crude was left depressed on Friday with prices trading below $46 as the persistent oversupply concerns haunted investor attraction towards the commodity. Prices were already vulnerable this week following the smaller than expected crude oil inventory draw and the boosted production from Saudi Arabia could keep prices pressured for an extended period. WTI crude oil is fundamentally bearish and the toxic mixture of excessive oversupply and waning demand from slowing growth fears could create a foundation for prices to trade towards $40. From a technical standpoint, a breakdown below $44 could open a path towards $40.
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