Financial Market Research and Analysis

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USD retreats on cheaper WTI
EURUSD traded higher for a third consecutive session. Stronger trend and momentum indicators hint at a further advance toward the 1.1200 handle (61.8% Fibonacci retracement on December to May rise). Above this level, we could see a stronger EURUSD towards 1.1300/1.1357 (76.4% Fibonacci retracement). A drop below 1.1130 (200-day moving average) could encourage a slide to 1.1070 (50% Fibonacci retracement).

The USDJPY hit 101.40 in Tokyo as the US dollar softened across the board. We see potential for a deeper sell-off. The next support is seen at 100.67 (August 2nd low). Below this level, the pair could extend losses to the critical 100.00 mark (July 8th low), then to 98.99 (July 24th low). On the upside, a rise above 101.85 (August 9th high) could attract bids and push the pair towards 104.26 (76.4% Fibonacci retracement on January to June decline).

Cable gained back the 1.30 handle after hitting the bottom at 1.2955 yesterday. GBPUSD is expected to consolidate at the current levels before next week’s inflation data. A rise above 1.3175 (August 5th high) could encourage a recovery towards 1.3411 (76.4% Fibonacci retracement on December to July decline). While a drop below the 1.2955 support (August 9th low), could cause a further sell-off toward 1.2849 (July 11th low).

AUDUSD extended gains for a third consecutive session as the RBA's Governor Stevens sounded less dovish than expected at his speech earlier in the session. He, of course, highlighted the limits to the monetary easing, the rising worries about debt and the softer growth trend. Yet the downside risks captured little attention in the FX market. The AUDUSD appears to be ready to test the 0.7700 handle. Above this level, we could see a further appreciation towards 0.7833 (April 21st high).

Gold rose more than 1 percent on Wednesday, on the back of a cheaper US dollar. Surpassing the $1366 (August 2dn high), we could expect a further rise to $1374 (July 11th high) and toward the $1400 handle. First support is seen at $1329 (August 8th low), if broken, should pave the way to 1300/1297 (76.4% Fibonacci retracement on January to July rise).

WTI pared gains on the back of a new set of data hinting at the persisting oversupply in the oil market. Besides, the likelihood of an OPEC deal to cap the production has decreased. WTI trades at $42.20 per barrel. Below the $42.00 supportl, we could see a further downside correction to the critical $41.33 (200-day moving average). On the upside, a rise above the $42.44 resistance (61.8% Fibonacci retracement on July to August decline) could give a new boost to oil buyers, and let the WTI appreciate towards 43.43 (50% Fibonacci retracement).

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