Oil prices jumped during the late American session yesterday as the US inventories according to API had an unexpected drop of -11.1 million barrels. The drawdown noted, was the largest since January 2018, marking a substantial tightening of the US oil market. Analysts tend to note that the substantial drawdown of the US oil inventories at least for the time being seems to ease worries about a global economic slowdown. Also, we would not find the drawdown unrelated to the reduction of active oil rigs in the US as the Baker Hughes US oil rig count last Friday, had indicated a record low number, since the beginnings of 2018, of active oil rigs in the US. It must be noted that the release was made from the American Petroleum Institute while the US government’s weekly report from EIA is to be released today. Should the EIA crude oil inventories reading confirm the sudden tightening of the US oil market, we could see oil prices gaining more ground. WTI prices rose yesterday breaking the 54.20 (S2) and the 55.20 (S1) resistance lines, now turned to support. We could see WTI prices correcting somewhat lower today yet the EIA release during the American session could provide further volatility for the commodity. Should the commodity come under the selling interest of the market, we could see them breaking the 55.20 (S1) support line and aim for the 54.20 (S2) support level. Should the commodity’s long positions be favoured by the market, we could see WTI prices breaking the 56.40 (R1) resistance line and aim for the 57.50 (R2) resistance level.
Pound strengthens on opposition agreement
The pound strengthened during yesterday’s European session as the UK opposition parties agreed to pass a law that stops the possibility of a no deal Brexit. The UK Parliament is to return from its summer break next week and seems to be preparing for big fights regarding Brexit. The leader of UK’s Labor party Jeremy Corbyn, talked with other opposition parties for the idea of passing a law that could force Boris Johnson to seek a delay in Brexit. The move encouraged traders to buy the pound despite the prospect of a hard Brexit still looming over the UK. It should be noted that the UK government, according to media, sees room to restart the Brexit negotiations after Boris Johnson had a meeting with France’s President Macron and Germany’s Chancellor Merkel. Despite the warmer tone from Brussels and the opposition plans to delay Brexit, we expect the pound to remain under pressure as long as these plans do not transform into an actual fundamental change. Cable rose yesterday testing the 1.2290 (R1) resistance line, yet proving unable to clearly break it. We could see the pair maintain the sideways motion of the past two days between the 1.2210 (S1) support line and the 1.2290 (R1) resistance line, yet should there be further Brexit developments, we could see volatility surrounding the pound. Should the bears dictate the pair’s direction, we could see the pair breaking the 1.2210 (S1) support line and aim for the 1.2135 (S2) support barrier. Should the bulls take over, we could see cable breaking finally the 1.2290 (R1) resistance line and aim for the 1.2370 (R2) resistance hurdle.
Other economic highlights today and early tomorrow
Today we during the European session, we get Germany’s GfK consumer sentiment indicator for September. In the American session, we get the EIA crude oil inventories figure. During the Asian session tomorrow, we get New Zealand’s business confidence indicator for August and Australia’s CapEx growth rate for Q2. Also please bear in mind that Richmond Fed President Barkin, Chicago Fed Daly and BoJ’s Suzuki speak today.
WTI H4
Support: 55.20 (S1), 54.20 (S2), 53.10 (S3)
Resistance: 56.40 (R1), 57.50 (R2), 58.80 (R3)
GBP/USD H4
Support: 1.2210 (S1), 1.2135 (S2), 1.2060 (S3)
Resistance: 1.2290 (R1), 1.2370 (R2), 1.2465 (R3)
