Oil traders on the edge of their seat

Amidst a rather slow-moving market for the start of the week, the USD remained relatively stable maybe even edged a bit higher, yet the market seems to be increasingly preparing for the release of the US May CPI rates and the Fed’s interest rate decision tomorrow, which is expected to be the highlight of the week for the markets. 

Across the Atlantic, we note the release of UK’s employment data for April which tended to send out mixed signals. On the one hand, the tick-up of the unemployment rate and the fact that the employment change figure despite an improvement remained deep in the negatives, tend to add pressure on BoE to cut rates. On the other hand, the acceleration of the average earnings growth rate tends to highlight that the UK employment market may continue feeding inflationary pressures in the UK economy and tends to suggest that the BoE keeps rates high for longer. 

Cable remained relatively unchanged just below the 1.2760 (R1) resistance line, yesterday and during today’s Asian session. We also note that the RSI indicator dropped nearing the reading of 50 implying that the bullish sentiment among market participants has faded away. Also, we note that the upward movement has been interrupted on Friday by the drop of the pair. Hence for the time being and given the stabilisation after Friday’s drop we tend to expect the sideways motion to continue. Should the bulls take over once again, we may see the pair breaking the 1.2760 (R1) resistance line and aim for the 1.2890 (R2) resistance level. Should the bears be in charge we may see GBP/USD breaking the 1.2600 (S1) support line and aiming for the 1.2480 (S2) support level.   

In the commodities market, we note the rally of oil prices yesterday. The market seems to be bracing for the release of OPEC’s market report for the month. Should the report display expectations for a robust demand outlook for the commodity, we may see oil’s price getting some support while should OPEC+ members keep production levels above their quotas we may see oil’s price falling. Another factor that could support oil’s price would be the high temperatures troubling the European continent over the past week, as they could lead to higher oil demand, yet that may prove to be short-lived. On the flip side, we noted reports that Saudi oil exports towards China seem to have been reduced which may halt oil bulls somewhat. Oil traders are also expected to keep a close eye on the release of the API weekly crude oil inventories figure later today and a drawdown could renew bullish tendencies for oil prices. Lastly the Fed’s interest rate decision on Wednesday could affect oil prices as should the Fed maintain a tight monetary policy, the oil market may expect lower economic activity in the manufacturing sector hence lower oil demand and in such a scenario we may see the release weighing on oil prices. 

WTI’s price was on the rise yesterday breaking the 76.70 (S1) resistance line, now turned to support. We tend to maintain a bias for the upward motion to continue based on the movement of the commodity’s price over the past five days. On the other hand the RSI indicator below our daily chart, has risen reaching the reading of 50 and implying that the bearish tendencies have faded away, yet has still to cross 50 and rise further to show the build-up of bullish tendencies among market participants. Should the bulls take over, we set as the next possible target for the bulls the 80.25 (R1) resistance line. For a bearish outlook, we would require WTI’s price to break the 76.70 (S1) support line but also to continue lower and break the 72.85 (S2) support level as well in order to form a new lower low.

Other highlights for the day:

Today we note that ECB Policymaker De Galhau, and ECB Chief Economist Lane are scheduled to speak. In the American session, we note the release of Canada’s April building permits growth rate.

GBP/USD Daily Chart

• Support: 1.2600 (S1), 1.2480 (S2), 1.2375 (S3)
• Resistance: 1.2760 (R1), 1.2890 (R2), 1.3000 (R3)

WTI Daily Chart

• Support: 76.70 (S1), 72.85 (S2), 68.00 (S3)
• Resistance: 80.25 (R1), 84.10 (R2), 86.80 (R3)

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