After the bullish start of the year, the rand has started to weaken since the last Thursday. Let’s point out the main factors affecting the ZAR and set the key levels for this week’s trading.
Oil market overview
Oil prices regained their footing on Monday following substantial losses they experienced last week as an OPEC-led committee pledged to back extension of the supply cut deal and as investors favored riskier assets after the first round of the election. Emmanuel Macron securing a spot in the second round avoided the horrific scenario of a contest between anti-EU Le Pen and the far-left Melenchon. The threats for the Euro area had been eliminated, and investors embraced more risk. A collective sense of relief that the Eurozone is over another hurdle resulted in a short-term risk-on rally.
U.S. West Texas Intermediate (WTI) crude oil futures jumped above $50 from $49.18 seen last Friday.
Brent oil futures peaked to $52.95 after following $51.55 last week.
To the present day, OPEC and non-OPEC members struck a tentative agreement to sideline their production beyond June, but there is still no consensus on the timing of the agreement and countries’ individual commitments. The next meeting of the OPEC members will be held in Vienna on May 25.
Just a small reminder, OPEC countries and other major oil producers are committed to reducing oil stockpiles and all signatory parties participating in the output cut deal are committed to restoring the market’s stability in November, 2016. Up to date, compliance with the cuts has improved in March compared to the previous month (compliance to supply curbs was more robust in March (98%) compared to February’s 90% estimate).
As energy ministers of the output deal cut signatories remind the markets about their intentions to curb oil supply, the oil prices will be heading upwards. Refusals to adhere to the cuts would become their headwinds.
The current oil rally will likely be faltered once again as we see more signs of the US crude oil production revival.
Last week, U.S. drillers added 5 rigs to oil fields, bringing them up to the count of 688, according to data from Baker Hughes Inc.
US crude stockpiles fell last week said Energy Information Administration last Wednesday. But it happened mainly because US refineries increased their output (the gasoline stocks have increased).
Another headwind for oil futures might be the issuance of the Trumps executive orders on energy and the environment later this week. The orders will make it easier for the US develop energy industry offshore, and will lead to increased production of US crude oil.
If we look at the daily charts of the US dollar index and the USD/JPY pair, we will see a misleading trend.
Britain has to leave the European Union in 66 days. Will it leave with a trade deal (good for the GBP) or without one (bad for the GBP)?
The last "Pennant" pattern has been broken, so bulls found resistance at 1.2915. Nevertheless, the market is likely going to move on, so we should...
USD/CHF remains weak across the board and stays strong with a bearish consolidation below the 200 SMA at H1 chart…
There's no any reversal pattern so far, so the market is likely going to test the nearest resistance area in the short term...