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From the Floor: USD rebounds on positive data — #SaxoStrats

   • USD rebounds on upwardly revised US Q2 GDP and solid ADP jobs growth
   • Dollar recovery could 'blossom' if USD ends the week on an upbeat note: Hardy
   • A follow-through could take EURUSD back down to 1.16 or 1.15 areas: Hardy
   • With around a quarter of US refinery capacity shut, gasoline hits $2/gallon
   • Crude oil and gasoline price divergence accelerated
   • Gold at critical stage in rally as USD recovery; many longs getting nervous: Hansen
   • Gold supported by geopolitical worries, including 'Trump's bullying of Congress'

Saxo Strats bannerBy John Acher

The US dollar, which has been through a rough patch recently, rebounded after second-quarter US GDP growth was revised up to 3% and private-sector jobs creation was brisk in August, as reported on Wednesday.

The US Commerce Department on Wednesday revised up Q2 GDP growth from the 2.6% pace reported last month, and the ADP National Employment Report showed private-sector companies added 237,000 jobs in August, up from 201,000 jobs in July.

“There is a lot at stake for the USD after some positive data points yesterday,” says Saxo Bank's FX strategy chief John J Hardy

The dollar's recovery could really "blossom" if the USD ends the week on a positive note, says Hardy, adding that a follow-through could take EURUSD back into the 1.16 or even 1.15 areas with the help of further favourable economic data.

EURUSD. Positive data (Q2 GDP revision, ADP payrolls) boosted USD further
Source: Saxo Bank 

Financial markets await a flash estimate of Eurozone inflation as well as US weekly jobless claims and the US personal consumption expenditures (PCE) price index — a key measure for the Federal Reserve — on Thursday, ahead of the US Labor Department's monthly employment data, also known as nonfarm payrolls, on Friday.

Energy commodities markets remain at the mercy of tropical storm Harvey, which has unleashed catastrophic flooding in Texas and Louisiana along the Gulf of Mexico, the heart of America's energy industry.

Hardy says that some estimates indicate that Harvey could be the costliest natural disaster in US history.

"The divergence between gasoline and crude oil accelerated yesterday,” says Saxo Bank's commodities strategy chief Ole Hansen.

With about a quarter of US refinery capacity shut, gasoline prices (the expiring September contract) have hit $2/gallon, and European fuel prices are also on the rise as US demand for imports climbs, Hansen says. "A double amount of tankers has been booked to carry fuel to the US."

Meanwhile, a backlog of unwanted US crude oil is keeping oil markets under pressure, Hansen says. 

After a jump above resistance, the gold price rally is in a critical phase, with many new longs getting nervous, and gold is at risk of long liquidation if the price falls back below $1,295/oz, says Hansen.

Gold price. XAUUSD
Gold price XAUUSD
Source: Saxo Bank 

But persistent geopolitical risks, including "Trump’s bullying of Congress" on his plans for tax reform, continue to support gold, he says.

Hurricane Harvey flooding in Houston Texas
 Flooding in Houston, Texas, caused by tropical storm Harvey. Photo: Shutterstock

John Acher is a consulting editor at TradingFloor.


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