Markets mixed as key events pass without drama
Another mixed session looks on the cards on Thursday, very much continuing the trend this week as we move passed what could have been a volatile Wednesday unscathed and look ahead to a relatively calm end to the week.
Investors and businesses I’m sure will be relieved to learn that no-deal Brexit has been avoided on Friday, while the rest of us are left wondering why we potentially have another six months of this nonsense. The extension has done nothing for the pound which priced this in a long time ago and remains towards the lower end of its trading range. In the absence of a Brexit deal and with the economy underperforming, facing another six months of uncertainty and maybe no rate hike as a result, the bullish case for sterling near-term may have significantly diminished.
Oil loses momentum just after breaking resistance
A second large inventory build in two weeks, reported by EIA on Wednesday, has seen the oil rally stutter just as it was getting going. A break through an important resistance zone last week looked to have been the catalyst for another pop higher in WTI, with the price having jumped from around $63 to $65 in just a couple of days but already we’re seeing consolidation around these levels and momentum appears to have waned.
The rise in inventories accompanied new economic projections by the IMF which highlighted slowing growth around the world and numerous risks to the economy. Reports that Russia may be contemplating raising production and refusing to partake in OPEC+ cuts beyond the current June deadline may also have contributed to oil quickly losing its appeal. There remains numerous supportive factors for oil prices though, with clashes in Libya drawing much attention despite current production being uninterrupted. Above $65, the $66-68 has previously been a major area of support and resistance so we may not have to wait long for the rally to once again run into difficulty, if of course it finds its mojo again.
$1,280 vulnerable if gold fails to break March peak
We’re seeing some profit taking in gold early in the day on Thursday, with the yellow metal coming on the back of four winning days in the last five. That’s an impressive run of form considering only a week ago we were seeing $1,280 – which is increasingly becoming an important support area – being tested by sellers only for it to be successfully defended once again.
Gold bulls should put the celebrations on hold though because we’ve now fallen short of the previous peak for a second time since it topped out in mid-February. That’s not to say we won’t see another run at it in the coming sessions but a failure to break through the March peak – around $1,325 – may reinvigorate the sellers and see $1,280 quickly come under pressure again. Of course, the dollar could have a key role to play and at the moment it is trading close to multi-month highs. A break higher could put $1,280 under considerable pressure.
