Market expectations for a possible rate cut by the FED, until October 2019 increased, weakening the greenback yesterday. The USD retreated after hitting its highest level for two years in the USD Index, signaling its weakness. There was also a loss of momentum for the USD, as second tier US financial indicators missed their target yesterday. Analysts once again stressed the possibility of a detrimental effect of a prolonged US-Sino trade war on the US economy enhancing the bearish sentiment for the USD even further. The USD seems to be stabilising during today’s Asian session, yet should worries persist we could see the USD weakening further, especially given the financial releases today. USD/JPY dropped yesterday breaking the 109.75 (R1) support line (now turned to resistance) and has currently stabilised below it during the Asian session. We could see the pair maintaining a sideways movement, yet today’s financial releases could weaken the USD, causing the pair to drop further. Should the pair come under renewed selling interest, we could see it breaking the 109.15 (S1) support line and aim for lower grounds. Should the pair’s long positions be favoured by the markets, we could see its price action breaking the 109.75 (R1) resistance level and aim for the 110.30 (R2) resistance hurdle.

Oil prices stabilize after worst daily drop in 5 months

Oil prices continued to weaken yesterday, as analysed yesterday due to the slack of the US oil market indicated by the EIA crude oil inventories. The drop in oil prices was the steepest for the year and prices retreated to early March levels, surrendering any gains made in that period. The IMF commented on Thursday that the latest escalation of the US-Sino trade war could significantly dent business and financial market sentiment, disrupt global supply chains, and jeopardize the projected recovery in global growth in 2019. The comments were perceived as weighing heavily on the demand side of oil, especially China’s. Prices seem to have stabilized currently, yet we would not be surprised if OPEC took action to rebalance the oil market at higher prices. WTI prices continued to drop yesterday as it was expected, breaking consecutively the 60.50 (R2) support level and the 59.10 (R1) support line, before bouncing on the 57.75 (S1) support barrier and currently stabilising above it. We could see WTI prices maintaining a sideways motion today, yet we could see the commodity prices correcting higher. We could also see WTI prices being somewhat sensitive to today’s Baker Hughes oil rig count figure. Should the bulls take control of WTI’s prices, we could see it breaking the 59.10 (R1) and aim for the 60.50 (R2) resistance line. Should the bears have the upper hand once again, we could see WTI prices dropping and breaking the 57.75 (S1) support line, aiming for the 56.00 (S2) support level.

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Other economic highlights, today and early tomorrow

In the European session, we get from the UK the retail sales growth rates for April and in the American session from the US, we get the durable goods orders growth rates for April and the Baler Hughes oil rig count. During Monday’s Asian session, BoJ’s governor Kuroda is scheduled to speak. Please note that on Monday the US and the UK are to have a bank holiday, while the EU Parliament election results are to be announced on Sunday at midnight and could create volatility for EUR pairs.

WTI H4

Support: 57.75 (S1), 56.00 (S2), 54.65 (S3)
Resistance: 59.10 (R1), 60.50 (R2), 62.00 (R3)

USD/JPY H4

Support: 109.75 (S1), 110.30 (S2), 110.90 (S3)
Resistance: 109.15 (R1), 108.50 (R2), 107.90 (R3)

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