In the short term, traders forgot about the conflict in Yemen and concentrated on nuclear discussions between Iran and other six world powers (US, Germany, France, the UK, China and Russia), which tried to reach a deal that could add oil to the market if sanctions against Tehran are lifted. Both the Brent and WTI oil market reached lower quotations (compared to the levels before the Yemen conflict eruption) while in the short term there might be more space for further decline. On the other side, it’s difficult to determine if the ascending tendency is over as traders are convinced that the bottom of the descending longer trend has been reached. The reality that we should not forget is that the output in the US remains strong, the Lybian production is recovering and the economic outlook for China and Japan is deteriorating; all these factors are poiting towards lower prices.
Technically speaking, the Brent oil just broke the lower side of the ascending channel, while a possible support level that could withstand is the 54.96 dollars per barrel and the local resistance stands at 56.47 dollars. Likewise, WTI oil is testing the 48 dollars support level as the support is located near 46.60 while the resistance stands at 49.45.
The president of the Federal Reserve, Janet Yellen, confirmed that the “new normal for monetary policy” is indeed represented by an increased interest rate. It appears that Fed is likely to start raising interest rates gradually later this year. The announce may come in September as the economy still has to heal some sectors as: the net exports affected by the dollar appreciation, the cutback in drilling activity caused by lower oil prices and the residential construction which is humble.
EURUSD left the ascending channel after testing the resistance level at 1.0950. The dollar appreciated and may continue this tendency while the EURUSD may test again the support level at 1.0800 as Greece and its international creditors continue talks on reforms to unlock loans. Creditors are disappointed by the first draft as they consider it more a collection of ideas rather than something that could be presented to the Eurogroup. A few more days may be needed before another reform list will be ready.
The sterling pound remains weak as on the medium term it’s struggling to stay in the 1.5000 and 1.4790 range. On Tuesday, the Current Account and Final GDP are due to be published, but the pound may still not find its encouraging factor. While the political tensions become increasingly significant, the governor Mark Carney is delivering good news. He declared that the next monetary policy decision may be an interest rate hike, but national currency needs something more than that to recover the lost ground.
