WTI meets the 20's and another Sterling sell off

WTI Oil momentarily dipped below the $30 psychological support hitting fresh lows at $29.95 in the late part of Tuesday’s trading session as concerns over factors such as the unrelenting oversupply in the markets and sluggish global demand for oil continued to haunt investor attraction. The pain of falling prices has already started to cause disagreements among OPEC members with Nigeria’s minister of state for petroleum resources Emmanuel Kachikwu suggesting an emergency meeting, but this idea was rapidly discarded by UAE Energy Minister Suhail bin Mohammed al-Mazroui who believes that the OPEC strategy is working effectively. Current prices show that oil is heavily depressed, and with no clear signs of an emergency OPEC meeting taking place it may only be a matter of time before WTI hits $29 and possibly lower.

GBP under intense pressure

The Sterling encountered another aggressive decline on Tuesday with the currency depreciating against all 16 of its major partners during trading yesterday. The catalyst behind another round of heavy selling for the UK currency was an unexpected set of weak data from the economy, which follows previous disappointing data such as the -0.7% decline in U.K industrial output during November to which investors reacted unfavourably. This was complimented with a slowing manufacturing output of -0.4% which has prompted further concerns over a visible slowdown in the UK’s manufacturing sector. Even Chancellor George Osborne is sounding downbeat on the UK economy just months after publicly speaking positively about the robust recovery and the recent economic data is fuelling anxiety that GDP prospects are slipping lower.

Investor sentiment towards the pound is clearly bearish and with slowing domestic growth rapidly reducing any expectations around the UK economy picking up in the fourth quarter of last year, the Bank of England (BoE) remains unpressured to raise interest rates from the record low of 0.5%.

The GBPUSD plunged on Tuesday with prices slamming through the 1.45 support and sinking to another fresh five and a half year low at 1.4355. Despite encountering excessive losses already in the early trading weeks of 2016, the GBPUSD outlook is still for further declines. We are breaking below significant technical support levels that are just encouraging sellers to push prices as low as possible, and it is still difficult to pinpoint where a possible floor in selling will be located.

UK interest rate expectations are being repeatedly pushed back and Friday’s positive US NFP release has reinforced the short term interest rate differential between the Bank of England and Federal Reserve. With the fundamentals and technicals on the GBPUSD all pointing to the downside, prices may decline towards 1.4300 and potentially lower still.

From a technical standpoint, there have been consistently lower lows and lower highs, while prices have traded below both the daily 20 and 200 SMA. Previous support at 1.45 should now act as a dynamic resistance which may encourage sellers to attack prices lower. A daily close below 1.4400 should also invite an opportunity for a further decline towards 1.4300.

Gold dips below $1090

Gold posted its third straight trading day of losses on the back of an appreciating Dollar, and has now dropped back from its highs last week to trade at $1083. Despite the recent gains promoted from the risk-off trading environment, this precious metal remains fundamentally bearish and pressured by US interest rate hike expectations for 2016. Friday’s firm NFP release has renewed the possibility that US rates could be increased once more before the end of the current quarter and this should limit how high prices could rise, especially if Federal Reserve policymakers continue to repeat an intention to raise rates a possible four times in 2016. With bears already installing another wave of selling momentum into this zero yielding metal, a solid breakdown and daily close $1085 should invite a further decline towards $1075.

CADJPY

The CADJPY is technically bearish on the daily timeframe as there have been consistently lower lows and lower highs. Prices are trading below the daily 20 SMA and the MACD has also crossed to the downside. This current bearish momentum may send prices towards 81.50.

GBPAUD

This pair is technically bearish on the daily timeframe and currently trades within a bearish daily channel. Prices are trading below the daily 20 SMA and the MACD has also crossed to the downside. A breakdown below 2.050 should encourage a further decline towards 2.0150.