After extending down to a near two-week low at 1.1305 on Monday, the EURUSD has steadily appreciated towards 1.14 before the European Central Bank (ECB) decision on Thursday. Although the EU economic sentiment remains bleak and the pressure on the ECB is intense in regards to doing more to reinvigorate the fortunes of the EU economy, the general consensus is that the central bank will not change monetary policy later on Thursday. The expectations that the ECB will not further QE quite yet is encouraging some purchasing of the Euro from traders.
With that being said, the economic sentiment in Europe is still as bleak as ever with the economy being continually plagued by both dangerously low inflation and stagnant economic growth. I am expecting policy members of the ECB to repeat the growing threat of further monetary stimulus and continue talking down the bounce in the Euro over the past six months because to be honest, the jump in the currency has nothing to do with improved sentiment in Europe. The only reason for the gains seen in the EURUSD after the pair hit over a 10-year low earlier this year is because US interest rate expectations have been repeatedly pushed back.
This is one of the major obstacles that the ECB face when it comes to the EURUSD, because a weak investor sentiment towards the USD will naturally lead to appreciation in the pair. Personally, I still don’t think the USD has “bottomed” out yet and weakness in the USD will remain as a probable theme in the currency markets. As US interest rate expectations get pushed into the first quarter of 2016 and possibility beyond, the USD will be at threat to further periods of vulnerability.
As they have been in late September and earlier in October, any advances in the EURUSD above 1.14 and towards 1.15 will be seen as possible selling opportunities for investors to keep an eye out for.
WTI slips below $45
Momentum for WTI has continued to look weak with the commodity now dropping below $45 to $44.85 in trading yesterday. Since unexpectedly advancing above $50 less than two weeks ago, WTI Oil has declined by over $5. The outlook for WTI remains bearish and I think prices are going to remain depressed throughout the remainder of 2015. The repeated signs of an aggressive oversupply of oil in the markets are going to remain a dominant threat to investor sentiment, and I also believe that the continual concerns over the global economy can lead to reduced demand for the commodity.
The possibility of there being reduced demand for commodities due to the ongoing concerns over the pace of global economic growth is something that I don’t personally believe has been priced into the markets. This can pressure prices further and it is important that investors keep an eye on the $44 area in WTI because this has been seen as stubborn support level in the past.
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