The GBP lost ground against the USD and the EUR in the past two consecutive daily sessions but rebounded against both on Thursday. The UK is still not finding a solution with the EU regarding Northern Ireland and some negativity on that front may have weakened the currency. Maroš Šefčovič the European Commission Vice President of Interinstitutional Relations and Foresight stated they are considering to take legal action against the UK over the matter. In our view the EU is currently running out of patience on the matter as the issue has been ongoing for years.
On a separate note fears that the UK may not be able to ease lockdown measures as expected on the 21st of June are present and very real. Many people are desperate to see the return to normality promised by the final stage of the roadmap to lifting lockdown. But UK officials have noted in the past that the 21st June may be subject to changes in the pandemic, including the emergence of new variants.
In any case GBP traders are out for a treat on Friday with GDP Estimates for April to be released as well as the Manufacturing Output data for April. These readings will be coming out simultaneously thus the market may focus on the overall picture or on any surprises.
Since the beginning of June GBP/USD is moving in a sideways motion between the (R1) 1.4180 resistance and the (S2) 1.4085 support. In our view these levels have proven to be rather sturdy and could prove stepping stones for further direction of the currency pair. If the pair moves higher the (R2) 1.4235 line could be engaged first while even higher the (R3) 1.4295 resistance represents the highest resistance for this chart. In the opposite direction a move lower could send GBP/USD below the (S1) 1.4130 line to retest the (S2) 1.4085, while our lowest level for this report is the (S3) 1.4035 which was last seen in May 2021. The RSI indicator remains within the 70 and 30 range indicating no major movement has been observed recently for the currency pair on a four hour chart basis.
WTI trades at $70 but reacts to geopolitical updates
WTI managed to maintain its upward momentum formed in the past days and stabilized at higher levels while at some point it briefly surpassed the previous monthly high reaching approximately $70.40 per barrel.
OPEC’s monthly report released on Thursday, stated demand for Oil is to rise by 6.6% or 5.95 million barrels per day (bpd) in 2021. The same forecast was noted in the previous months report indicating the dominant Oil group is confident in the numbers. The report also highlighted various threats that the virus and the variants pose to the recovery and rebalancing of the Oil market. Of course the ongoing vaccination process is a subject that counters doubts and is crucial at this point.
Finally, an update on Thursday seemed to have disturbed traders making them react to the news. WTI’s price performed a quick drop lower in the mid US session after media reports suggested the United States lifted sanctions on Iranian officials who previously had relations to the Oil market. This is a subject we had warned about in our weekly Oil report on the 10TH of June. From a geopolitical view, talks between the US and Iran over a nuclear deal have created expectations that Iranian oil could soon flood the markets and supply could be destabilized. It remains to be seen.
At the moment we are seeing WTI hovering above the (S1) 69.40 level which was yesterday in the past days when the commodity briefly touched $70.40, yet the price action returned nearby the (S1). If the commodity continues to move upwards then the (R1) 71.70 level could become a target. Above that, we have set the (R2) 73.20 line and the (R3) 75.00 level as other targets for the buys. Very impressively these levels were last seen back in 2018 which can potential become multiyear highs for WTI. If traders are more interested in a selling turn then below our (S1) we have noted the (S2) 67.70 that was tested from the 1st and 2nd of June making it relevant to recent price action. Even lower the (S3) 65.30 is also a relevant level and represents our lowest level for this analysis. The RSI indicator below our chart has made a move lower dropping from the 70 level which was briefly reached in the previous days possibly indicating some orders were closed and take profit was carried out.
Other economic highlights today and the following Asian session:
Today during the early European session, we get the UK’s GDP estimates and Manufacturing Output for April. In the US session, we get the Preliminary University of Michigan Sentiment for June. Later in the US session we also get the weekly US Baker Hughes Oil rig count figure.
Support: 1.4130 (S1), 1.4085 (S2), 1.4035 (S3)
Resistance: 1.4180 (R1), 1.4235 (R2), 1.4295 (R3)
Support: 69.40 (S1), 67.70 (S2), 65.30 (S3)
Resistance: 71.70 (R1), 73.20 (R2), 75.00 (R3)