The US dollar’s weakness offered a boost to emerging-market currencies and oil.
Daily News: the USD is recovering
- The US dollar index managed to recover. On Monday, it had been trading at lows of the middle of June, however, managed to rebound. Up to now, the index has been trading near the psychological level at $94. No important economic data will be released today. The USD needs additional support to break the resistance level. The next one will lie at $94.45. Otherwise, the index will return to the support at $93.50.
- Although the pound didn’t react immediately to the release of the negative news on the Brexit deal and even managed to test two resistances, later on Monday, the market took into consideration negative perspectives of the Brexit and the pound fell. GBP/USD tested the support at 1.3220 (the pivot point) but closed above it. It’s a good signal for the pair, as it’s still above the pivot point. However, today’s economic data are weaker than anticipated. As a result, the pound is depreciating further. If the pair breaks the pivot point, the next support is at 1.3155. The resistance is still at 1.3280 but pound needs positive news on Brexit.
- The US dollar index has recovered, as a result, other assets have weakened. Yesterday, gold managed to test the resistance at 1,264.40, however, couldn’t break it. Up to now, XAU/USD has been moving down. The further strengthening of the USD will pull the pair to the support at 1,251. The resistance is still at 1,264.40 but in this case, the US dollar should be weak.
According to Goldman Sachs, sell off in metals on trade tensions is over. However, the drop may become worse before it gets better. Further fall of commodity prices will affect the AUD. The currency will suffer even more.
- The Australian dollar is weaker because of the recovering of the USD and weak economic data. NAB business confidence actual figure was weaker than the previous one (6 vs 7).
50-day MA didn’t give the AUD/USD pair to move further, as a result, the pair is moving down. The support is at 0.7445. If the USD is stronger, the pair will break the support and the next one will be at 0.7370.
- Société Générale is more bullish on the short-term oil prices than before. Despite the fact that Saudi Arabia and Russia will increase oil output by 1 Mb per day, the supply is anticipated to tighten.
Spare capacity is getting tight now. By the end of July, the total spare capacity will decline to 1.0-1.5 Mb per day. Sanctions on Iran are anticipated to have a bigger impact than it was forecast. If oil countries replace the losses from Iran, there will be no spare capacity left. Outages in Libya and Canada will affect the supply as well.
As a result, the WTI price in the 3 quarter is anticipated to be at $75, in the 4 quarter at $73. In 2019 the average price will be $67.8.
Up to now, Brent has been recovering. It has already tested 2 resistances at $78.20 and $78.60. The next resistance is at $80. MAs are moving up, it’s a positive signal for the price. In case of negative news on the oil market, Brent will return to the support at $77.50.
WTI has been moving up as well. It’s trading near $74.30. The resistance lies at $75.30. If there is negative news, the support will lie at $73.75.
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Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.