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Daily News: the oil shock
- The US dollar index is a little bit weaker today. Yesterday it managed to break above the psychological level at $94.50 and closed at $94.71. Economic data will affect the index today. CPI, core CPI and unemployment claims figures will be out at 15:30 MT time. The forecast is neutral: the inflation data forecast is similar to the previous data, unemployment claims figure forecast is greater than the previous data but not a lot. If the actual data are greater than the forecast ones, the US dollar index will go up. The resistance is at $95. The negative economic data will pull the index down. The support is at $94.
The USD is weaker, other currencies are recovering.
- Yesterday EUR/USD couldn’t stick above the resistance at 1.1735 and fell below the support at 1.17 (the pivot point). Up to now, the pair has been trying to recover. ECB monetary policy meeting accounts (release at 14:30 MT time) may affect the euro. If there are some positive clues on the economic conditions, the pair will be able to break above the pivot point. 50-day MA near 1.1725 will be the next level to break. If the market doesn’t get any positive clues, there will be risks of the further fall. The support is at 1.1630.
- It’s an important day for the pound. The UK government will release its White paper with new proposals on the Brexit deal. Previously, the market was shocked by some resignations in the UK government. However, now the main risk is a vote of no confidence for Theresa May.
There is a chance that the pound will strengthen after the release of the White Paper, as any progress on the deal is a key to the GBP growth.
Up to now, GBP/USD has been moving to the resistance at 1.3225 (the pivot point). Positive signals after the release will pull the pair above it. The next resistance is at 1.3280. Otherwise, the pair will turn around to the support at 1.3155.
- The oil market shocked traders on Wednesday. Both oil benchmarks strongly fell. The reason is the unexpected significant rise of the oil production in Saudi Arabia. Even a strong decline in the number of crude oil inventories didn’t support the oil price. Brent fell from $78.65 to $73.05, the fall of WTI wasn’t so big but significant as well: from $73.95 to $70.01. Up to now, the market has calmed down. As a result, both oil benchmarks have been recovering. Brent is trading near the resistance at $74.90. If it’s able to break it, the next resistance is at $76.
WTI rebounded from the support at $70.63. The resistance is at $72.20.
If there is no shocking news in the near future, oil has chances to recover. MAs are moving up on Brent and WTI charts. This is a good signal for the oil prices.
A forecast form ANZ.
According to the bank, a net production will increase by 600K bbl a day in the second half of 2018. The increase will come at the cost of the spare capacity. The possibility of the production rise in 2m bbl a day by Saudi Arabia is unlikely because it will diminish the spare capacity to 0. OPEC supply will be limited with further disruptions (Iran, Libya, Venezuela, Angola).
What about demand? Trade wars tensions will affect the economic growth and as a result, the oil demand. The forecast for the oil market: oil prices will remain volatile. Prices will be in a range of $75-80 a barrel in the second half of 2018.
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The US Bureau of Economic Analysis will publish Core Personal Consumption Expenditures (PCE) on May 27 at 15:30 GMT+3.
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The Reserve Bank of New Zealand will publish a monetary policy report and make an update on the interest rate on May 25, at 05:00 GMT+3.