23 November 2015
Written by Lukman Otunuga, Research Analyst at FXTM
Oil concluded last week with an improved sentiment from investors following a sharp drop of US oil rigs at the end of the trading week. The steep drop of US oil rigs has increased optimism that the growing inventories from the US might have hit a peak, however we have also heard this many times in the past. Investor sentiment remains continuously haunted by an aggressive oversupply of Oil in the markets and even if US production is slowing down, other producers such as Russia and Saudi Arabia are pumping higher volumes, while Iran is also supposed to enter the fray and begin unleashing their own supply potentially next year.
Technically WTI is bearish on the daily timeframe and previous support at $42.50 may act as a dynamic resistance which should invite an opportunity for sellers to send prices back down towards $39.
The noticeable depreciation of the USD across the global currency markets has offered a false lifeline to assets which were previously being depressed by Dollar strength, such as Gold which has appreciated to daily highs of $1088 on Friday. Regardless, Gold remains fundamentally bearish and with the direction completely dictated by US interest rate expectations, a rate increase in December threatens to send Gold back towards its lows and may invite an opportunity for a further decline to $1050.
Technically Gold is bearish and prices are riding the outer skins of the Bollinger bands. This false lifeline offered by temporary USD weakness may be used as an opportunity for sellers to send prices back towards $1050.
Sentiment remains bearish towards the Euro and following Mario Draghi’s dovish rhetoric on the Eurozone economy last week, investors acknowledged that the ECB will likely ease monetary policy with some expecting this as early as next month. Later today the latest set of Euro zone PMIs are announced, and any further signs of slowing growth around Europe could lead to further selling in the Euro. The recent PMIs have pointed towards slowing growth and if this pattern continues, further pressure will be placed on the ECB to do more to reinvigorate growth.
Currency Spotlight GBPUSD.
The bounce in the GBPUSD over the last week had little to do with any improved sentiment towards the UK economy and the clear resistance from some BoE members towards raising UK interest rates is likely to encourage some further softness in the pair. There is an event risk for the Pound this week with the autumn statement set to be announced by George Osborne. If the UK Chancellor hints towards widespread spending cuts in the future, this has the potential to impact domestic confidence and limit investor attraction towards the currency.
Technically speaking the GBPUSD resides in a bearish channel and prices have corrected to the 61.8% Fibonacci retracement around 1.530. A breakdown below the 1.515 may invite an opportunity for sellers to send prices towards the relevant 1.510 support.
USDCHF
The USDCHF is technically bullish on the daily timeframe. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. As long as prices can keep above 1.0100, there may be a further incline towards 1.0250.
AUDUSD
The AUDUSD is in the process of turning bearish of the daily timeframe. A break below the lows of Friday may offer an opportunity for sellers to send prices back down towards 0.7100.
USDJPY
This pair is technically bullish on the daily timeframe as there are higher highs and higher lows. A breakout above 123.75 may invite an opportunity for buyers to send prices back towards 124.50. A move back below 122.00 suggests bullish weakness.
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