US dollar continues to fall after being pounded by further negative economic releases. The US dollar Index declined to 105.10 this morning, slightly higher than yesterday's lows. Yet, the index remains within the lowest price range since April of this year. The fundamental picture will continue to develop today as the US will announce its Preliminary Consumer Sentiment Index, which could create volatility.
Markets are also paying close attention to the British pound, which was partially supported by the announcement of the country’s monthly Gross Domestic Product. The GDP figure declined by 0.6%, which, technically speaking, is not favorable for the economy, but at the same time, is much better than the previous predictions, which ranged between -1% to -1.2%. So far, the pound has not responded with a significant price movement, but investors will continue to monitor the asset throughout the day.
The stock market saw a stall in the recent bullish trend over the past month and this week. All three leading US indices declined, but no major volatility was observed. The oil market, on the other hand, continues to see volatility and price gain for the second consecutive day. Investors are slightly uncertain of the mixed opinion within the market as the Organization of the Petroleum Exporting Countries (OPEC) and the Energy Information Administration (EIA) both give completely different signals.
Crude Oil - Technical View
During yesterday’s trading session, the crude oil increased by 2.60% - the highest increase within a single day that we’ve seen since Jul. 18. Based on most wave theories, the price is still technically within a downward trend as it has not yet crossed the previous wave. Additionally, its current price action measures lower than the downward trend seen between Jul. 29 and Aug. 4.
Nonetheless, the price movement is still significant, and traders will keep an eye on it to see if the asset can maintain momentum. The move this morning has lost momentum, falling into a very small retracement, but this also allows investors to see if the price breaks out of the retracement into a further price high.
The price movement of crude oil is influenced by multiple predictions and comments from different organizations within the industry. Unfortunately, each side seems to be painting a different picture. OPEC has advised that demand is at risk and may decline to a level where supply may overtake demand. On the other hand, the EIA has advised that demand will continue to increase, and Goldman Sachs has also kept its stance, advising that oil will rise above $100 again at some point.
This morning, Christof Ruehl, a well-known energy markets expert, advised Bloomberg that the price of oil can decline as low as $80 but may increase to levels previously seen. According to Ruehl, the price will depend largely on China and other developments in the market. He also advised that there is uncertainty about the price due to the current global scenario.
GBP/USD - Technical View
The price of the GBP/USD pair is not seeing a major reaction from the release of the UK’s Gross Domestic Product nor from Federal Reserve comments. The market will be looking at the reaction and volatility levels once the US trading session opens and more investors are introduced into the market.
Currently, the price seems to be mainly driven by the movement of the US dollar, which appears to be similar to other USD currency pairs. On the charts, we can see that the USD has shed a reasonable amount from its value but has also hit a major resistance point which can be seen at the 1.2258 level on the GBP/USD.
Other than the UK’s GDP figure, which came in at -0.6%, the asset is also being influenced by recent comments made by Ms. Mary Daly, the head of the San Francisco Federal Reserve. Ms. Daly advised that she still expects a 75 basis point increase in interest rates during the September meeting of the regulator.
In addition, she advised that the regulator has “not claimed victory over inflation” she continued to explain that inflation remains high and may still increase over the coming months and possibly early 2023.
Investors are also slightly cautious about Ms. Truss, the election campaign leader for the next Prime Minister. She has recently repeatedly advised that she may empower officials to have the option to overturn the Bank of England’s decision on the country’s monetary policy if it endangers economic development.
Of course, this has not been seen in many decades and caused a negative reaction from most economists. The bank’s chief economist, Mr. Pill, advised that the independence of the regulator is important because it can make tough decisions on monetary policy, unlike governments that are mainly driven by short-term political interests, popularity, and votes.