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Oil slides on OPEC uncertainty

WTI Crude received a pummelling on Tuesday with prices sinking below $49.50 after reports displayed an inflated rise in U.S inventories which revived concerns over the excessive oversupply in the markets. Oil's selloff was complimented with anxiety towards Russia not joining the OPEC supply curb which raised questions over the success of the pending meeting in November. With Iraq requesting an exemption from the output curbs after Iran, Nigeria and Libya this just throws a spanner into works consequently pressuring oil even further. It is becoming quite clear that OPEC members have exploited the market sensitivity to generate speculative boosts in prices and such may come at a painful cost if investors are left disappointed on November the 30th.

Sentiment remains bearish towards oil with this horrible combination of uncertainty and oversupply fears creating a firm foundation for sellers to drag oil prices lower in the short-term. From a technical standpoint, a breakdown below $49 could open a path lower towards $47.50.

Sterling struggles to keep afloat

Sterling displayed its sensitive status in the foreign exchange markets during trading on Tuesday by stumbling over 1% ahead of Carney's testimony, only to shock investors by staging a remarkable rebound mid-way through Carney's speech. Traders were swift to attributing Sterling's decline to comments from U.K Chancellor of the Exchequer Phillip Hammond, but the sheer lack of liquidity and gloomy mood amid the persistent hard Brexit fears could have played a key role in the selloff. In October the pound has depreciated roughly 6% against the Dollar with further declines expected as mounting hard Brexit fears spark renewed rounds of selling. It's the terrible amalgamation of political uncertainty, fears over the UK losing its access to the European single market and anxiety over the future of the UK economy after the article 50 is invoked which have made Sterling a sellers dream.

From a technical standpoint, the GBPUSD is struggling to keep afloat on the daily timeframe. Prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. The break below 1.2200 could encourage a further decline towards 1.2000.

Dollar bulls on tea break

Dollar edged lower during early trading on Wednesday as investors exploited Tuesday's soft U.S economic data to take profit on the currency's recent rally. The consumer confidence in the States declined to 98.6 in October from 103.5 in September which sparked concerns over households maintaining a cautious stance as the presidential election loomed. Despite the soft economic release, the bullish sentiment towards the Dollar remains unchanged with the Fed-fund futures showing a 78.5% probability of a rate increase in December. Investors may direct their attention towards Friday's GDP report for the States which if exceeds expectations could act as another key chest piece for a rate hike in December.

The Dollar Index is heavily bullish on the daily timeframe as there have been persistently higher highs and higher lows. Previous resistance around 98.00 could transform into a dynamic support which invites a further incline towards 99.50.

Draghi on the defence

Mario Draghi was defensive on Tuesday in Germany's capital when he insisted that the ECB's aggressive bond buying and ultra-low interest rates had not harmed German households. Although the concerns from German banks on how low rates have eroded their portfolios were acknowledged, it seems likely that Draghi's defensive comments may fortify expectations over the ECB bolstering its 1.7 trillion euro bond-purchase program at its December policy meeting. The EURUSD remains under noticeable pressure on the daily timeframe and is currently fundamentally bearish as the expected monetary policy divergence between the ECB and Fed encourage bears to install repeated rounds of selling.

Commodity spotlight – Gold

Gold bulls exploited the instance of risk aversion on Tuesday to propel prices towards $1275. Regardless of the short term gains, the metal remains pressured by renewed US rate hike expectations while a strengthening Dollar's ensures upside gains are capped. The current technical correction on the daily timeframe could offer an opportunity for bears to attack. From a technical standpoint, bears should be able to maintain control below $1285 with a breakdown below $1260 sparking further declines.

Author

Lukman Otunuga

Lukman Otunuga

ForexTime (FXTM)

Lukman Otunuga has been a Research Analyst at FXTM since 2015. A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in fundamental and technical analysis.

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