WTI drops to $43.38, down 0.20% on a day, ahead of Wednesday’s Asian session. In doing so, the oil benchmark fades Tuesday’s upside momentum that challenged the monthly high near $43.65.
However, the oil prices are currently testing the lower band of the bollinger, which in turn suggests no further downside, which if ignored can highlight an ascending trend line from Friday, at $43.10 as the key support.
In a case where the bears refrain from respecting $43.10, the weekly low around $42.30 will be in the spotlight.
On the contrary, a falling trend line connecting the highs since yesterday, near $43.50, offers immediate resistance ahead of the monthly top surrounding $43.65.
During the quote’s run-up past-$43.65, the February month’s low if $43.94 will be the key as it holds the gate for the quote’s run-up to March month’s peak close to $48.75.
24-hour view: “Yesterday, we highlighted that USD ‘could edge higher towards 106.25’ but held the view that ‘a sustained advance above this level is not expected’. The subsequent pace and extent of USD strength exceeded our expectation as it soared to an overnight high of 106.57. While the rapid advance appears to be running ahead of itself yet, there is no sign of weakness just yet. From here, there is room for USD to test the major resistance at 106.70 but a clear break of this level is unlikely (next resistance is at 107.00). Support is at 106.15 followed by 105.90.”
Next 1-3 weeks: “We highlighted on Monday (24 Aug, spot at 105.80) that USD ‘is still in a consolidation phase and is expected to trade between 105.00 and 106.70’. Upward momentum is beginning to improve as USD rose to a high of 106.57 yesterday. While a move above 106.70 is not ruled out, further USD strength is likely only if it closes above the major resistance at 107.00. At this stage, the prospect for such a scenario is not high but it would increase as long as USD does not move below 105.60 within these few days.”
“FOMC minutes showed the Fed is trying to strike a balance between high macro uncertainty while also acknowledging improvements in markets and data alike. Looking ahead, it seems clear the policy stance ahead will be based on whether: i) global demand keeps improving as expected, ii) we get another dose of fiscal easing to buffer the shortfall in personal income, and/or iii) an unwind of the tightening of banks’ credit conditions is witnessed. Since the July meeting, all three of these have been pointing towards improvement.”
“For the ECB, given favourable liquidity operation terms and ongoing ECB PEPP purchases, the increasing excess liquidity from the ECB will act as a weakening pressure on the EUR. Thus, we see EUR/USD risks as tilted to the downside, as the consensus narrative of European outperformance now seems stretched.”
“Our main scenario is that optimism towards EU economic outperformance remains elusive and thus, this time is not different. This will likely take EUR/USD quite a bit lower and we keep our forecast unchanged. We, therefore, target 1.16 in one-to-three months and 1.12 in six-to-twelve months. Markets have priced a closing of the productivity gap vis-à-vis US but we do not expect this to materialize.”
“Upside risks to take us towards 1.25, say, include 1) EU proves to be an engine of world growth, 2) the Fed credibly commits to inflation overshooting and 3) harsh regulation of US technology companies.”
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