WTI Oil skids toward December 2008 crisis low

Sentiment towards WTI Oil received another devastating blow during trading on Friday with prices falling to yet another milestone low at $35.15 following more gloomy comments from the International Energy Agency (IEA) that oversupply conditions could actually worsen in 2016. The recent comments from IEA followed further downbeat comments from a few weeks ago that prices could stay below $80 until at least 2020. Concerns were already at alarming levels regarding the aggressive oversupply, and further downbeat comments from this major agency were pivotal towards sending WTI Oil to its new milestone low at $35.15. Investor sentiment towards oil had already taken a heavy hit following the OPEC meeting two weeks ago, and the never-ending pain for the commodity has basically erased any chance of a recovery in prices before the end of the year.

Regarding OPEC, it is pretty clear that their decision to continue leaving production unchanged is motivated by the hope of regaining market share and pushing away other competitors from the market. The latest data showing that the organization pumped 31.7 million bpd in November more than any month since late 2008 reinforces this statement. Any hopes over an immediate production cut have rapidly faded leaving WTI Oil fundamentally bearish, and this dangerous combination of an unrelenting oversupply mixed with a cooling demand may encourage sellers to attack prices lower. WTI remains under extreme pressure and this will drip back down to those currencies that belong to economies which are reliant on oil exports.

From a technical standpoint on the daily timeframe, WTI is heavily bearish as there have been consistently lower lows and lower highs on the charts. Prices have almost clipped the $35 support and a breakdown below this level may encourage sellers to send prices towards the crisis lows of 2008 at $32.40. Lagging indicators such as the daily 20 SMA and the MACD, which also point downwards, compliment this bearish view.

Risk aversion renews appetite for JPY

Global financial markets have turned sour as the looming Federal Reserve decision and new milestone lows in the oil markets have promoted a wave of risk aversion from investors. European and American equities received punishment during trading on Friday, concluding the week negatively as anxious investors flocked away from riskier assets amid the slide in oil prices. Appetite for safe haven instruments received a welcome boost with the JPY seeing its biggest weekly gain in 3 months. The continued optimism over the increased likelihood that the Federal Reserve may raise US interest rates may spark a further selloff in global equities as speculations mount that higher US rates may trigger capital outflows from elsewhere.

Commodity spotlight – Gold

The risk-off environment created from the slump in oil prices and USD weakness as the looming Fed decision weighs on sentiment has offered an opportunity for bullish investors to drive Gold prices to a weekly high at $1079.5. Regardless of the recent gains, this precious metal remains bearish and the growing optimism that the Fed will be raising US interest rates next week should limit how high Gold can advance. There is still potential for Gold bears to install another round of selling momentum throughout metals and with the Fed funds prices in up to an 80% chance of a US interest rate rise this week, Gold remains heavily bearish and open to more losses.

From a technical standpoint, prices are trading below the daily 20 SMA and the MACD has also crossed to the downside. A breakdown below 1063 may encourage sellers to send the metal towards 1046.

USDCHF

The USDCHF 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. A breakdown below 0.9820 may encourage sellers to send the pair towards 0.9710.

AUDUSD

The AUDUSD is in the process of turning technically bearish on the daily timeframe. Prices have crossed the daily 20 SMA but the MACD still trades to the upside. A consecutive daily close below 0.7200 may invite sellers to send the AUDUSD back down towards 0.7050.

SILVER

Silver is heavily bearish on the daily timeframe. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. The heavy close on Friday should provide enough momentum to send prices towards 13.50.