The GBP strengthened yesterday as the UK and EU reached a draft deal regarding their future relationships. The draft deal sounded more generic and underscored the intention of the two parties to have an “as close as possible” trade relationship. Analysts also point out, that a lot of details will need to be addressed and that the document may fail to convince the markets that it will pass through parliament. The fact that the two sides were able to reach a draft deal strengthens possibilities for a positive outcome of Sunday’s EU summit. The main question remains though if Theresa May will have the necessary majority to pass the Brexit deal through parliament which may constraint the market’s reaction. Volatility could continue to exist for the pound as details of the draft deal could leak, as well as any possible reaction.
Cable rallied on the news yesterday, breaking consecutively the 1.2850 (S1) resistance line (now turned to support) and the 1.2920 (R1) resistance level, however corrected below the latter, later on. The pair had stabilised above the 1.2850 (S1) support line during the American session yesterday and the Asian session today, however its direction could be influenced by any further Brexit headlines during the day. Should the bulls dictate the pair’s direction, we could see it breaking the 1.2920 (R1) resistance line and aim for the 1.3015 (R2) resistance barrier. On the other hand should the bears take over, we could see the pair breaking the 1.2850 (S1) support line and aim for the 1.2780 (S2) support hurdle.
Oil hits 2018 lows once again
Oil prices dropped yesterday as concerns about a possible global glut emerged, combined with worries for a weaker economic outlook. Analysts point out that at the moment, even OPEC’s intentions of curbing production to prevent a possible glut, provided little support yesterday. The US shale oil producers seem to intent to increase production, while the demand outlook seems to be weaker due to a possible economic slowdown. On the other hand OPEC members, may adjust production accordingly, in case of a lower demand. We could see volatility rising for black gold as its price is nearing the lowest level for 2018.
Oil prices dropped yesterday breaking the 54.15 (S1) support line. As the downward trendline, incepted since the 10th of October, seems to be in control of oil prices, we maintain our bearish outlook for the commodity’s prices. It should be noted though, that the RSI indicator in the 4 hour chart for WTI remains below the reading of 30, implying a possibly overcrowded short position. Should black gold continue to be under the selling interest of the market, we could see its price action breaking into even lower levels (the lowest for 2018), breaking the 52.10 (S1) support line and aiming for the 49.40 (S2) support barrier. Should on the other hand, the market favor the pair’s long positions, we could see WTI prices breaking the 54.15 (R1) resistance line, the prementioned downward trendline and aim for the 56.15 (R2) resistance level.
In today’s other economic highlights:
In the European session, we get the final release of Germany’s GDP growth rate for Q3 and a number of preliminary PMI’s for November relating to the EUR (Eurozone, Germany, France). In the American session, we get from Canada the inflation rates for October and the retail sales growth rate for September. From the US we get the preliminary reading of the Markit PMIs for November and the baker Hughes active oil rig count.
WTI H4
Support: 52.10 (S1), 49.40 (S2), 47.35 (S3)
Resistance: 54.15 (R1), 56.15 (R2), 58.30 (R3)
GBP/USD H4
Support: 1.2850 (S1), 1.2780 (S2), 1.2700 (S3)
Resistance: 1.2920 (R1), 1.3015 (R2), 1.3085 (R3)
