The WTI crude traded higher for the 6th consecutive session. Yet, gains past $50 were not stable last week. Price above the 50-week moving average ($49.50) could seem relatively high for opening fresh positions for many traders who are waiting for a concrete commitment to limit production from the OPEC and its allies. On the other hand, the EIA (Energy Information Administration) head Neil Atkinson warned that the lack of new investment in crude production could shrink the global glut and fall short of rising demand. This could raise ‘at least a possibility’ of returning to a ‘very, very high’ prices similar to a decade ago.
The GBPUSD consolidates gains on the back of a significant hawkish shift following the Bank of England (BoE) meeting last Thursday. Friday’s London tube attack did not trigger a significant action in the currency markets. The pound bias is positive and a large call option will expire at 1.3575 today. Support to the post-BoE rally stands at 1.3505 (minor 23.6% retrace) and 1.3438 (major 38.2% retrace).
The EURGBP is preparing to challenge the 200-day moving average (0.8732) on the downside. BoE Governor Mark Carney will speak at the Central Banking Lecture hosted by IMF in Washington DC. The audience is expected to ask questions. Mark Carney will certainly keep his policy stance unchanged, although the Brexit risks could be mentioned.
The EURUSD trades rangebound around its 200-hour moving average (1.1955). The Eurozone’s final August inflation data is due today. The headline inflation is expected to have accelerated to 1.5% year-on-year in August from 1.3% printed a month earlier; the core inflation is seen stable at 1.2%. The gap between the headline and the core inflation could be explained by higher transportation costs due to firmer fuel prices and may not have a significant impact on the European Central Bank (ECB) expectations.
German election is due on September 24. Many traders may be willing to avoid an event risk before the election; therefore, the directional moves could fail to gather momentum.
The USDJPY extended gains to 111.25 on the back of improved risk taking. The US 10-year yield recovered to 2.20%. The next natural target for long-USDJPY positions stands at 111.50 (200-day moving average) and 111.75 (major 61.8% retrace on July – September fall). The daily MACD (Moving Average Convergence Divergence) turned positive, suggesting a stronger positive momentum above 110.90/110.80 support (Fibonacci 50% level / 100-day moving average). Japanese stock markets were closed due to bank holiday.
The Bank of Japan (BoJ) is expected to maintain the status quo at this week’s meeting. The divergence between then Fed and the BoJ policy outlook is supportive of a further USDJPY advance.
Gold retreated to $1’314 on improved sentiment. The downside correction could deepen. The key support to the July – August rise stands at $1’300 (major 38.2% retracement).
The antipodeans were the biggest gainers overnight. The AUDUSD is upbeat above 0.7995. Intermediate resistance is eyed at 0.8040 (50% retracement on September 8/14 retreat), 0.8060 (major 61.8% retrace) and 0.8085 (minor 76.4% retrace).