The downside break below $56.80 a week ago was a critical indicator that the price of WTI was set for an aggressive decline and the bears have since managed to push the price down as low as $50.57. There’s a combination of different factors that are merging together to weaken investor sentiment towards WTI, but it does appear that the main inspiration behind the recent selling is optimism that progress over an agreement on Iran’s nuclear program is being made. An agreement would see economic sanctions on Iran eased, meaning that up to a further two million barrels a day could be pumped into the market. However it’s important to point out that it would require time for Iran to boost production levels to their potential output.

Investor sentiment is continually plagued by oversupply concerns and bearing in mind that these remain at the same elevated levels as they have always been, the oil markets were always vulnerable to a sudden reversal of previous gains. Aside from oversupply concerns, what I would say is contributing to this sudden selling pressure is anxiety that demand for WTI is declining. One of the issues with the ongoing situation in Greece is that the wider implications of a country leaving the Eurozone or at least defaulting on their loan repayments is largely unknown, meaning this could have a knock-on effect outside of Europe that would lead to reduced demand for WTI. In addition to this, declining economic momentum is continuing to be the running theme of the China economic story in 2015 and with China being among the largest importers of crude anyway, slowing growth in China would lead to less demand for WTI.

The downside pressure in WTI is also inspiring selling momentum in currencies with economies linked to crude exports, such as the Canadian Dollar, Mexican Peso, Malaysian Ringgit and Russian Ruble. It is the emerging market currencies that are going to feel the most pain over the selling pressure in WTI and I will be keeping an eye on both the Malaysian Ringgit and Indonesian Rupiah over the coming days. The problem that the emerging markets are facing is that the resumption of selling in WTI is happening at the exact same time as USD appetite is picking up with the Federal Reserve interest rate rise expected in the next couple of months. This is the exact same combination that led to the emerging market currencies declining at a rapid rate at the beginning of 2015, and it does look like recent history is repeating itself once again. It would also not surprise me if the lower price of oil weighs on investor sentiment towards futures, which are already at risk to vulnerabilities over the continual uncertainty in Greece.  


Despite the continual uncertainty in Greece and the risks of a Grexit actually intensifying following the Greek referendum results, there remains no sign in the slightest for increased appetite towards purchasing Gold. The metal dropped to a near four-month low at $1147 yesterday and if we fall just over another $5, we will record another yearly low.

I wouldn’t say the news that former Greece Finance Minister Yanis Varoufakis had resigned, and optimism that this could inspire a deal between Greece and its creditors to finally be reached, has anything to do with the losses in Gold early this week. There is simply no buying interest towards the metal as we approach the timing of a US interest rate rise. Rather than seeing the decline in Gold as being inspired by Varoufakis’ resignation and increasing optimism that a deal over Greece might be easier to conclude, I prefer to think that the losses in Gold are linked to the possibility that Wednesday evening’s FOMC Minutes might contain an unexpected hawkish comment about US interest rates. 


In line with all expectations, the GBPUSD has continued to decline since rallying to a 2015 high just above 1.59 late last month. The previous rally was a complete over-extension and although the GBPUSD has since dropped as low as 1.5413, I still think there is some selling momentum left to push this pair a little lower down the charts. There are a variety of different reasons behind why investor sentiment towards the Pound has suddenly become very weak, but I think the main inspiration behind the sudden selling momentum is Bank of England (BoE) Governor Mark Carney admitting that UK financial stability is exposed to pressures over the Greece situation. With the Greece uncertainty continuing and perhaps even reaching new levels following the decision from the Greek people to overwhelmingly reject austerity, investor sentiment towards the Pound has consequently weakened.

The way I see it - if the BoE Governor admits his concerns over how the Greece situation could impact UK financial stability, just imagine what his views would be if an EU referendum was announced. While the UK’s direct exposure to the Greece situation might be “minimal”, the fact that Prime Minister David Cameron, Chancellor George Osborne and Governor Carney are meeting suggests more than enough to validate that there are risks to the UK economy over Greece. Now if an EU referendum was later announced, we can expect further downbeat comments because the UK economy is highly reliant on its trade with Europe. Not only would this inspire further downside pressures on the GBPUSD, but it would also have interest rate repercussions and further push back any expectations for the BoE to begin raising rates next year.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.