Risk sentiment was back on the table as equities retreated off fresh highs made earlier into the week. The declines came after news reports revealed that US airstrikes had killed Iran’s top military commander.
Iran vowed to retaliate, sparking tensions once again. President Trump said the US would avoid a war at all costs, but that it also stands ready to declare it if necessary.
German & French Inflation Exceed Forecasts
The preliminary inflation report for Germany and France came out better than the forecasts. Germany’s headline inflation rose 0.5% on the month, beating estimates of a 0.4% increase.
French inflation rose 0.4%, beating estimates of 0.3%. This is only the preliminary report for the month of January.
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EURUSD Finds Support at 1.1131
The common currency extended declines to establish support near the 1.1131 level. Price action quickly rebounded off this level. However, the EURUSD remains range bound within 1.1177 and 1.1131 region.
A breakout from this range is needed to confirm further direction. The bias could likely shift to the upside.
UK Construction Activity Slips in December
The monthly construction activity, as measured by IHS Markit deteriorated further in December. Construction PMI fell to 44.4 in December compared to 45.3 in the month before. The declines continue to highlight the uncertainty surrounding the UK Brexit deal.
Will the GBPUSD Decline Resume?
Cable initially corrected the downtrend as prices rose from the lows near the 1.2960 to 1.3226 level. However, since then, GBPUSD is settling into a downtrend.
Price action closed below the 1.3100 level. If this level holds as resistance, we expect price to push lower to the 1.2960 region of support.
Crude Prices Surge to Highest Level Since April 2019
The tension between Washington and Tehran is pushing oil prices higher. WTI crude oil rose to intraday highs of $64.00 before retreating slightly. Price closed 3% higher on the day as a result.
The international Brent oil surged towards the $70 handle before settling at $68.7.
WTI Crude Oil Likely to Establish Support
Following the breakout above the resistance area of 61.83 and 61.00, price action is likely to resume the uptrend. However, there is a chance for oil prices to retrace lower ahead of the gains.
The price level near 61.83 will likely see a test of support. If this support holds, we expect prices to maintain the upside bias.
