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USD bulls put pressure on Oil and Sterling

USD bulls have continued their strong run globally, as weakness in overseas market continues, but also strong economic growth continues to be a major factor. US retail sales m/m were very strong today coming in at 0.5% (0.1% exp), showcasing that consumers are not worried about tariffs or the high USD for that matter and currently are out spending. If consumption is a good indicator of economic health it may also bolster inflation expectations as retailers feel they can increase prices slightly during periods of expansion without fear of losing to many customers. So while economic growth is strong so far the markets will be looking to the FED to see if it changes its mind about anything and if more future rate hikes are coming in the long term.

On the markets though today oil was for me one of the more interesting trades as it hit the bullish trend line and beat a retreat shortly after. US oil inventories once again showed much more stronger figures than anyone expected with a surplus of 6.8M (-2.5M exp), with only gasoline registering a drawdown on stockpiles. Oil has also struggled against a robust USD at present which has managed to hold back the oil bulls as well, but with OPEC holding back supply it's likely we could see prices remain elevated.

Looking at oil on the chart we've hit the sweet spot for bullish support here with the trend line coming into play and also support at 63.98. Technically I would expect the bulls to be stronger here as the market has a chance to push back against the recent trend, however at present it's still looking  a bit weak. With that weakness in mind I would be careful of a push through here to support at 61.93; if we did see that happen then the bears are likely to really take hold of things in the current market climate. If the bulls do however wrestle back control resistance can be found at 66.03 and 67.45.

The pound has continued to come under large pressure from markets as the Brexit debate continues to rage and the prospect of a hard Brexit looks to impact markets. I would expect more impactful debate on Brexit from the UK government after the summer break, nevertheless the major sticking points have no solutions and it looks like it could get drawn out for much longer than anyone expected and markets won't be loving it.

For the GBPUSD the fall is likely to continue with the uncertainty and support at 1.2652 has so far stopped any further movements lower. If we a see a breakthrough at this level then I would expect to see it fall as low as 1.2461 and even potentially further lower if markets feel a no deal Brexit is coming. On the flip side, if the bulls can push back then resistance can be found at 1.2798 and 1.2958 as well.

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.

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