The greenback strengthened yesterday against a number of its counterparts as better than expected data was released from the US. The markets reacted favourably as the retail sales growth rates outperformed expectations last month and ignored the slowdown of the industrial output growth rate. The favourable data according to analysts, tamed concerns of the market for an aggressive monetary policy easing by the Fed. It should be noted that the USD may also have gained ground due to the current weakness of other currencies, such as the EUR and GBP. Characteristically the pound failed to strengthen, even as the employment data for May released yesterday, showed a tight UK labour market, while the EUR was also weakened due to increased pessimism of German investors. Please note that Fed Chairman Powell reiterated yesterday that the Fed will act as appropriate amid increased uncertainties. We expect that the Dollar may remain Fed driven in the coming days, albeit data may play also a significant role in its direction. EUR/USD dropped yesterday, breaking the 1.1220 (R1) support line, now turned to resistance. Our main scenario is for the pair to retain a rather sideways movement for today, however bearish tendencies could be again present for the pair. Should the pair come under the selling interest of the market once again, we could see the pair breaking the 1.1180 (S1) support line and aim for lower grounds. Should the pair’s long positions be favored by the market, we could see it breaking the 1.1220 (R1) resistance line and aim for the 1.1260 (R2) resistance level.
Oil prices drop heavily on Iran talks prospect
Oil prices dropped yesterday as news broke out that the US is about to start negotiations with Iran. A number of media reports cited U.S. Secretary of State Mike Pompeo as saying “for the first time” Iranian officials “are ready to negotiate on their missile program”. In addition, media also mentioned that Trump stated at a cabinet meeting, that the US had made progress with Tehran and did not wish war or regime change there, although he did “want them out of Yemen.“ On other news, the API weekly crude oil inventories show a substantially narrowed drawdown yesterday reaching -1.4 million barrels, albeit had little effect on oil prices. We expect the market to be closely watching today’s EIA release in order to indirectly confirm also the much-discussed increased US production levels. WTI prices dropped heavily yesterday, breaking consecutively the 59.50 (R1) and the 57.70 (S1) support line, albeit corrected higher than the latter later on. We could see the commodity’s prices drop lower today, especially should the prospect of the US-Persian talks be increased. Should the bears dictate WTI’s price direction, once again, we could see it breaking the 57.70 (S1) support line and aim for the 56.00 (S2) support level. On the other hand, should the bulls take over, we could see the commodity’s prices, aiming if not breaking the 59.50 (R1) resistance line aiming for higher grounds.
Other economic highlights, today and early tomorrow
Today, during the European session, we get UK’s main inflation measures for June and from the Eurozone the final CPI rate for June. In the American session, we get from the US the number of house starts as well as the EIA crude oil inventories figure for the past week, while form Canada we get the CPI rates for June. During tomorrow’s Asian session, we get Japan’s trade data for June and Australia’s employment data also for June. Please bear in mind that the G7 meeting is to begin tomorrow in Paris, France and on the agenda there is the issue of cryptocurrencies and cybersecurity. Given the recent concerns, expressed by various national authorities (including France, Japan and the US), we could see some delegates calling for stricter regulation of the cryptomarket, which could create some volatility.
EUR/USD H4
Support: 1.1180 (S1), 1.1140 (S2), 1.1100 (S3)
Resistance: 1.1220 (R1), 1.1260 (R2), 1.1300 (R3)
WTI H4
Support: 57.70 (S1), 56.00 (S2), 54.45 (S3)
Resistance: 59.50 (R1), 61.00 (R2), 62.70 (R3)
