WTI surged with a new lease of vitality during the last trading week of August, surpassing technical resistance above $42.50 and concluding the week gaining $11. This represented the strongest gains for over four years and the surge rippled across not only the FX markets, but the equities and global stock markets as well. This also provided a welcome boost for those currencies with economies reliant on commodity exports, with emerging market currencies particularly benefitting after receiving punishment throughout the earlier weeks of August.
Emerging markets such as Brazil and Nigeria were offered a breath of fresh air, and even emerging market stocks in general rose by the highest rate as seen in around two years. The unexpected gains in WTI over Thursday and Friday just show that the commodity is continuing to trade with extreme sensitivity. The bad news is bad news, but the good news is extremely good news for WTI. For example the constant oversupply in the markets is a continual threat to investor sentiment, but the impressive US GDP result has encouraged optimism over the global economic recovery. Saying that, the news that two major pipelines in Nigeria were shut down due to leaks and sabotage might have contributed to the improved investor sentiment as this could lead to a short term decline in supply.
Looking at the recent developments and gains with WTI, it would appear that investors have temporarily forgotten the supply side issues with this commodity. Whilst Saudi Arabia and neighboring nations might have increased investment in oil production, other OPEC members such as Nigeria and Venezuela have reportedly cut production and this suggests that the depressed prices are hurting these exporters. The next OPEC meeting is in early December, and the issue of the oversupply and a possible cut in production may be discussed if low prices are hurting producers.
The main focus this week will be the US NFP. While the recent global market events have inspired suspicions that a September rate hike will be postponed, the Federal Reserve are continuing to repeat that any US rate hike will be data dependent, and another impressive jobs number from the United States will encourage optimism the central bank might still raise rates before the end of 2015.
As the USD gained last week with bullish sentiment reimbursed, the EURUSD traded to the downside. While USD has regained momentum, there was a recent paradigm shift on the Euro and the currency might still benefit from a risk-on environment. Technically the EURUSD has shown bearish tendencies with four negative days last week. Today has started intraday bullish with support found around the 1.1150 level. For bulls to take control once more, this level must hold, followed by a further breach of 1.1300. Technical lagging indicators such as the 20 SMA and MACD point to the upside, on the condition that prices do no trade below 1.1150.
USD strength last week was the main ingredient which caused the GBPUSD to sink to the lows of 1.533, levels not seen since early July. This market has become technically bearish and both leading/lagging indicators concur. Prices trade below the 20 SMA and the MACD has crossed to the downside. The monthly pivot of 1.5560 may act as a resistance which should bring prices lower. It must be kept in mind that the NFP results will be released this week, and a strong performance might drive the GBPUSD even lower.
The AUD continues to be suppressed by the global decline in demand and prices for commodities. This single currency is fundamentally bearish and a strong NFP this Friday can drive the AUDUSD back to its 2015 lows at 0.7035. The AUDUSD is currently finding technical resistance at 0.72, the pair is still technical bearish but trading in a period of consolidation. Prices trade below the daily 20 SMA and the MACD has crossed to the downside. It might be wise to monitor how strong the 0.72 resistance continues to act, if the AUDUSD extends above here then the next relevant resistance can be found at 0.74.
The USDJPY corrected itself following the aggressive moves on Black Monday. Prices surged back up to the 61.8% Fibonacci level following the initial move drop, and 121.70 has become the new trend defining level. Prices must stay below here for the bearish daily outlook to hold. USDJPY trades below the 20 SMA and the MACD crosses to the downside, technically most attributes tick for a further move lower. Fundamentally the JPY is still strong due to the risk-off environment, but Friday’s NFP has the ability to breakthrough these technical and because of this, the outlook is only valid until Friday morning.
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