The price of WTI Oil has jumped significantly to $37.90 with buyers finding heavy encouragement following tensions between Saudi Arabia and Iran intensifying to new levels over the weekend. The story around intensifying tensions between Saudi Arabia and Iran is continuing to develop and there is potential for further volatility in the oil markets if other nations begin to comment on what is currently escalating, especially if this includes high oil producers around the region.
I think that the market reaction towards what is currently emerging out of Saudi Arabia and Iran just goes to show that there is still interest in purchasing oil. It is well – known to everyone that Saudi Arabia is a massive oil producer and Iran is expected to also begin unleashing its own production in 2016, meaning traders have found a reason to push oil prices higher. Investors will have to continue monitoring how the news out of Iran and Saudi Arabia develops because to be honest, traders might have just found an excuse to push prices higher in the short term. As of yet, there are no changes to production and the current gains indicate that this is a reaction to a hypothetical opinion that if tensions continue to escalate, production levels might change.
The bitter truth is that the major reason behind the oil prices being crushed over the past 15 months or so has been that there is an aggressive oversupply of the commodity in the markets. There is still an aggressive oversupply, which is why traders need to monitor what is currently developing geopolitically because it doesn’t immediately change the economic outlook for oil.
In reality, oil concluded 2015 over 35% lower because sentiment had continually been plagued by the persistent oversupply fears and anxiety over the global economy. From a technical standpoint WTI resides in a wide range with support based at $35 and resistance at $39. A breakdown below $35 should encourage sellers to send prices towards the next relevant level based at $32.40.
Sterling heads into 2016 under pressure
Sterling bears were installed with inspiration during trading throughout the final weeks of 2015 with the GBPUSD commencing trading for 2016 edging closer to its April 2015 low around 1.4565. Sentiment towards the Sterling is still looking pressured and the recent report around analysts suggesting that the UK Pound is the most over- valued currency in the world could add to the already low investor attraction. For the most part of 2015 the pound has received punishment from the clear resistance from the BoE towards raising interest rates, while continual low inflation and increased expectations that the UK economic growth is slowing down can provide investors with opportunities to continue attacking the Sterling further.
Later today investors will be waiting the latest manufacturing PMI for the UK economy and if it follows the same downwards trajectory of the previous manufacturing release in December, then the GBPUSD may be left vulnerable and open to further declines.
Speaking of the GBPUSD, sentiment towards the pair hit a new low on Friday with prices sinking to a fresh eight-month low at 1.4733. This pair remains heavily bearish and the BoE’s hesitance to committing to raising UK rates may offer a short-term interest rate differential between the Bank of England and the Federal Reserve, ultimately providing an opportunity for sellers to send prices lower.
From a technical standpoint, the candlesticks are trading below both the daily 20 and 200 SMA, while the MACD also trades to the downside. Previous support around 1.4850 may become a dynamic resistance which should encourage sellers to send prices towards the lows of April 2015 at 1.4565.
Gold hovers above $1060 support
Gold concluded 2015 around 10% lower, marking its third straight annual loss. This yellow metal weakened heavily as a result of an appreciating Dollar, which was encouraged by expectations around US interest rates being increased. Now that Federal Reserve has finally increased interest rates, investors will be cautious towards evaluating how many further increases in the US rates there will be in 2016. Currently the Fed has suggested four increases this year, which is a risk for Gold and removes significant potential away from a recovery. Further Dollar appreciation may be the key to spur sellers to send prices down towards $1046 and potentially lower this trading month.
Technically Gold is bearish and a breakdown below $1060 should provide an opportunity for bears to drag prices back down towards $1046.
The GBPNZD is technically bearish on the daily timeframe. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. This downwards momentum may take prices to the next relevant support based at 2.100.
This pair is heavily bullish on the daily timeframe as there have been consistently higher highs and higher lows. Prices are trading above the daily 20 SMA and the MACD also trades deep into the upside. A breakout above 15.60 may open a path to the next relevant level at 15.90.
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