It was a choppy trading session for oil markets as prices initially rose roughly 1% on Wednesday morning before later surrendering all gains to shed -0.6% as of writing.
Although bulls are finding support from a sharp drop in US crude stockpiles, gains are being limited by an appreciating Dollar and reports of OPEC cutting its forecast for oil demand in 2020. Oil could still recover in the near term thanks to the improving market mood and speculation around OPEC extending production cuts. However, the upside is bound to face numerous obstacles down the road.
The dynamic influencing oil prices are certainly shifting from supply side to demand side factors and this continues to be reflected in the commodity’s valuation. Should US-China trade tensions make an unwelcome return and reignite fears around slowing global growth, oil will be exposed to downside shocks.
However, despite all the uncertainty, oil still remains in the black year-to-date with WTI Crude rising 28% and Brent appreciating 17%. Nevertheless, I still believe the outlook for oil will be clouded by trade developments and global growth concerns for the rest of 2019.
Taking a look at the technical picture, WTI Brent remains in an uptrend on the daily charts. A solid daily close above $63.00 should inspire a move higher towards $65.00. Should trade tensions return and revive risk aversion, prices may make a move back towards $60.00.
Euro weakens to one-week low as ECB meeting looms
The Euro was bullied by almost every single G10 currency today excluding the Danish Krona as anticipation mounted ahead of the European Central Bank meeting on Thursday.
Expectations are very high over the central bank joining the global easing bandwagon in a bid to support the Eurozone’s economy. While the Euro is positioned to weaken further if the ECB fulfils the dovish market expectations, it remains to be seen whether this will have the desired impacts on the European economy.
Focusing on the technical picture, the EURUSD remains in a bearish trend on the weekly charts. A solid weekly close below 1.1000 should open the doors towards 1.0900. If Mario Draghi disappoints, the Euro should rebound towards 1.1100.
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