WTI attained a monthly close below the 47.0 level, matching the predictions undertaken on the 28th of July. This is very relevant in a technical sense, but the fundamentals further reinforce for a steeper decline to the lows of 2015. Friday’s unsatisfactory wage growth figures merged with USD sensitivity, acted as a catalyst which drove WTI almost a dollar before positive Chicago PMI figures bolstered bullish USD sentiment sending prices below the 47.0 level. This commodity has taken a beaten globally with the slowdown in China capping any solid momentum to the upside.
Whilst demand for WTI slowly deteriorates globally, there still seems to be an influx of supply. First it was the Iran nuclear deal in mid-July that would see supply increase to as much as 120,00 barrels per day, now there was more news on Friday which stated that the number of oil drilling rigs in the U.S rose. Oversupply and a diminishing demand have taken oil to its current level and will take it lower in the coming future.
Canada has felt the brunt of this with its economy taking a hit. With two consecutive periods of negative GDP m/m, they are in a technical contraction. The interest rate cut by the BoC in addition to the batch of negative Canadian news releases has made the CAD weak amongst its pairs and such can be observed with the USDCAD, GBPCAD hitting new weekly highs. The trade balance and employment rate will be released this week with negative results expected. The source of the problem for Canada is Oil and China, if these 2 entities do not change, market participant will remain CAD bearish.
Today the Focus will be Manufacturing PMI for the GBP and ISM Manufacturing PMI for the USD. As expected, figures printed out positive for the GBP. The UK economy is doing quite well and a rate hike would have been on the table if not for the current state of inflation. BOE Carney will be speaking on Thursday to shed more light. ISM for the USD is also expected to be positive, figures have been improving since April and this will be part of the minor attributes which will solidify the pending rate hike in September.
WTI remains bearish technically, fundamentally and economically. The slowdown in China, fused with an oversupply globally have taken this commodity below the 47.0 level. A monthly close below 47.0 has occurred and the next technical target will be the monthly S2 of 45.00. The daily timeframe confirms that this is bearish, as there are lower highs and lower lows. Prices reside below the monthly pivot and daily 20 SMA. The technical breakdown below 47.0 has confirmed that the new trend defining level holds at 49.0. Prices may simply correct back to 47.0 or trade lower to 45.0 as long as 49.0 holds.
Intraday – This is intraday bearish. Prices reside below the hourly 20 SMA and the MACD trades to the downside. 47.0 remains as the intraday trend defining level with a move to the daily S1 of 46.10 looking realistic.
For 10 trading days, gold bulls have failed to take prices back above the 1100.0 resistance. The range has been wide with support around 1071.0. This still remains a bearish market both technically and fundamentally. The strong USD and lack of appetite for Gold in China have capped the value of this precious metal. NFP on Friday may generate volatility and create direction.
Intraday – Since the sharp incline on Friday, Gold has been intraday flat. A breakdown below 1091.50 may open a path to the daily S1 of 1083.0. Positive ISM manufacturing results this afternoon should act as the catalyst. A move back above 1099.0 invalidates this intraday bearish outlook.
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