Market Brief
After a sharp drop on Wednesday, crude oil prices consolidated during the Asian session, with the West Texas Intermediate trading sideways at around $46.80 a barrel, while the international gauge, the Brent crude, was trading at around $49 a barrel. The sell-off in crude oil prices came on the heels of an unexpected increase in US stockpiles. Indeed US crude oil inventories increased by 2.5mio barrels in the week ending August 19, beating widely median forecast of a reduction of 0.85mio after contracting 2.5mio in the previous week. After decreasing consistently from May to June, given a solid boost to prices, inventories are increasing again together with rig count, which is up more than 25% over the last three months. We therefore think the rally in crude oil prices is running out of steam and that we should see another correction.
It was a relative quiet session in the FX market with most G10 currencies appreciating slightly against the greenback. Indeed, the US dollar retreated somehow on Thursday ahead of Federal Reserve Chair Janet Yellen on Friday at Jackson Hole. Yellen is expected to give better regarding the scale and timing of the normalization process initiated last December, especially after several Fed members, including Vice Chair Stanley Fischer, dropped some hawkish comments during press conferences. The muted response from the treasury market suggests that investors still doubts the Fed will be able to push the button before the end of the year. After sliding 0.40% yesterday, EUR/USD edged up 0.05% to 1.1270 in Tokyo. The most traded currency pair is slowing heading towards the next support that stands at 1.1231 (Fibonacci 61.8% on June debasement), while on the upside a resistance lies 1.1366 (high from August 18).
The Australian dollar was the best performing currency amongst the G10 complex. The Aussie rose 0.20% against the greenback as crude oil prices stabilised. The Norwegian krone and the New Zealand dollar were also better bid as commodities were trading slightly higher. AUD/USD tested the 0.7639 level in Sydney before easing slightly to 0.7625. USD/NOK edged down to 8.2040, while NZD/USD tumbled once again on the 0.7335-0.7350 resistance area and returned at around 0.73. Trading volumes should remain weak in the FX market ahead of Yellen’s speech; however, emerging market currencies are expected to be more volatile.
Today trades will be watching manufacturing confidence from France; retail sales from Denmark; PPI and GDP from Spain; unemployment rate and PPI from Sweden; IFO from Germany; initial jobless claims, durable goods orders, services and composite PMIs from the US.
Currency Tech
EUR/USD
R 2: 1.1616
R 1: 1.1428
CURRENT: 1.1269
S 1: 1.1046
S 2: 1.0913
GBP/USD
R 2: 1.3534
R 1: 1.3372
CURRENT: 1.3215
S 1: 1.2851
S 2: 1.2798
USD/JPY
R 2: 107.90
R 1: 102.83
CURRENT: 100.43
S 1: 99.02
S 2: 96.57
USD/CHF
R 2: 0.9956
R 1: 0.9775
CURRENT: 0.9660
S 1: 0.9522
S 2: 0.9444