Daily Commentary | 12/04/2019
USD strengthens on strong financial data
The USD strengthened against a number of its counterparts yesterday, as it was supported by the release of strong US financial data. As per analysts the strong inflation and labour data released yesterday soothed concerns about the US economy, supporting the USD. It should be noted that yesterday’s inflation data, send out a bullish signal for the USD, contradicting the mixed signals sent on Wednesday by the US inflation rates. Analysts point out that it remains to be seen if the dollar can sustain its bounce and the prospects of a rate cut by the Fed until year’s end may have diminished, yet the prospects of a rate hike are still to be seen. The advance of the USD was also supported by a subsequent rise in US treasury yields. We expect the USD to remain data driven for the near term, yet at the same time any statements of Fed officials will probably be scrutinized by the market for any further signals. USD/JPY rose yesterday, breaking the 111.40 (S1) resistance line (now turned to support). The par could prove sensitive to today’s financial releases, however should optimism continue to strengthen the greenback, we could see the pair continuing its rise. Should the bulls maintain control over the pair’s direction, we could see it breaking the 112.00 (R1) resistance line and aim for the 112.50 (R2) resistance level. On the flip side, should the bears take over, we could see the pair breaking the 111.40 (S1) support line and aim for the 110.90 (S2).
Oil prices remain stable despite OPEC led production cuts.
Oil prices remained rather stable yesterday and during today’s Asian session being pressured from recent oil stock surpluses in the US oil market on the one hand and OPEC supply cuts on the other. US sanctions on petroleum exporters Iran and Venezuela seem also to be pushing the bulls of the oil market. Also it should be mentioned that the strains in Libya’s civil war adds further nervousness in the supply side of oil. Analysts point out that rallies of oil prices triggered from geopolitical issues could shoot oil prices well above current levels. On the demand side, growth in oil consumption still originates from Asia and growth in areas such as China and India are seen as critical. We see the case for oil prices to continue to rise, however there may be some instability in the near term, as oil prices seem to be at a crossroad. WTI dropped a bit, yet overall the movement could be characterized as sideways, testing the 63.80 (R1) support line (now turned to resistance). We maintain a bullish outlook for the pair, as technically the upward trendline remains intact. Should the commodity’s long positions come under the market’s favor, we could see WTI prices breaking above the 63.80 (R1) resistance line and aim for the 65.30 (R2) resistance level. On the other hand, should WTI prices, come under the selling interest of the market, we could see WTI prices dropping and aiming if not breaking the 62.00 (S1) support line and continue to threaten the prementioned upward trendline.
Other economic highlights, today and early tomorrow
In today’s European session, we get China’s trading data for March and Eurozone’s industrial production growth rate for February. In the American session we get form the US the preliminary University of Michigan consumer sentiment indicator for April and the Baker Hughes oil rig count.
• Support: 111.40 (S1), 110.90 (S2), 110.30 (S3)
•Resistance: 112.00 (R1), 112.50 (R2), 113.20 (R3)
• Support: 62.00 (S1), 60.85 (S2), 59.00 (S3)
•Resistance: 63.80 (R1), 65.30 (R2), 66.50 (R3)