Financial Market Research and Analysis

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Oil swings on pact to freeze production
EURUSD lost 1% yesterday as ECB President Draghi said he will ‘not hesitate to act’ to give a boost to the Eurozone economy that has been struggling with slow growth and negative inflation. Yesterday’s slide below the short-term support of 1.1160 (Fib 38.2% retrace on Jan 29 – Feb11 rise) signal a short-term bearish reversal. Breaking 1.1110 daily pivot, we could expect a further fall to 1.1093 (Fib 50%) before 1.1055 (200-day moving average).

USDJPY first gained to 114.87, then pared all gains in Tokyo to start the European session at intra-day lows. Hourly chart suggests that an intraday recovery to 114.50/75 should lead to a formation of golden cross (50hma > 200hma) and could increase chances to test the critical 115.08 resistance (Fib 38.2% retrace off Jan 29 high 121.69). Only a break above this level is expected to gather enough momentum for further recovery towards 118.00/120.00 area. Intermediate resistances are eyed at 116.34 and 117.60 (Fib 50% and 61.8% retrace). Failure to clear 115.08 offers should encourage a pullback to 113.51 (minor 23.6% and 100-hour moving average).

GBPUSD broke below the 1.4477/1.4488 (area including the 50, 100 and 200hma). Both bulls and bears stay on the sidelines before Feb 17-18 summit which should give some clarification on the Brexit vote. GBPUSD stepped in the bearish consolidation zone with the older Fibonacci support, 1.4470 (38.2% retrace on Jan 29 – Feb 4th rise), now eyed as resistance suggesting a further slide to 1.4354 (minor 23.6% on mid-term Fibonacci retracement).

AUDUSD remains well supported by the carry inflows and is now testing the critical resistance at 0.7165/0.7180 (pivot / minor 76.4% retrace on Feb 4 -9 decline) to extend gains toward the 200-day ma (0.7296).
Near-term support is in the 0.7016-30 area marked by the November 10 low and the 38.2% Fibonacci expansion. A daily close below this barrier opens the door for a challenge of the 0.6947-64 zone (horizontal pivot, 50% level).

Gold continues its decline. As the $1200 mark is broken, the next short-term support is eyed at $1180 (major 38.2% retracement on Dec’15 – Feb’16 rally). Below this level, the short-term bearish reversal could encourage further sell-off to $1155 (Fib 50%), before $1130 (200-day moving average).

WTI and Brent are paring gains after having traded past 5% as oil powers agreed to freeze production at January levels. The positive intraday sentiment lost momentum as the barrel slipped back below the $30. Presently, the oil market is being subjected to significant volatility. Yet the fundamental shift on the supply curve suggests that a sustainable recovery could be ahead of us. WTI could find support at $29.40/$30 and aim for a bullish breakout. Surpassing the four month down-trending channel’s ceiling, $32, a recovery could extend to 34.50/35.00 levels. A strong collaboration in the oligopolistic oil market could even bring the $40 mark on the radar sooner rather than later.

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