WTI Crude staged an extraordinary rebound this trading week with prices charging towards $49 as expectations intensified over OPEC securing an effective freeze deal at next week’s formal meeting in Vienna.
The repeated comments from Iraq and Iran displaying their readiness towards fighting the oversupply woes have played a key part in oil’s resurgence while Russia’s willingness to join an OPEC led production freeze continues to boost investor attraction towards the commodity.
Although these aggressive gains are quite spectacular, investors should remain diligent as OPEC could be exploiting oil’s sensitivity to create speculative boosts in prices. With the lingering oversupply anxieties and fears of slowing demand still weighing on sentiment, upside gains on oil could be capped moving forward. OPEC may be playing a dangerous game if investors are left disappointed with another “Doha failure” potentially deepening the oversupply woes in 2017.
Sterling bulls make a mystery move
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Sterling/Dollar experienced a shocking mystery move on Monday with prices flying almost 100 pips in 60 seconds consequently leaving most traders bewildered. It was later identified that comments from Theresa May easing some hard Brexit fears attributed to Sterling’s aggressive resurgence. Theresa’s May soothing tone at the CBI’s 2016 conference lifted prospects of a transitionary period for the UK’s trading relationship with the European Union, which could effectively provide some breathing room for UK businesses to adapt to the new trade channels once the Brexit is complete.
The sharp appreciation in Sterling feels unsustainable with bears exploiting this opportunity to drag prices lower. It seems Sterling has been tainted by the Brexit woes with any appreciation achieved seen as another ticket for bears to drag prices even lower. From a technical standpoint, the GBPUSD bears need to conquer 1.240 for a decline lower towards 1.220.
Investors may direct their attention towards Wednesday’s autumn statement where Chancellor of the Exchequer Philip Hammond discusses the state of the UK economy and summarizes the government’s spending plans. While it is widely expected that there will be some moderate spending on infrastructure and housing stimulus from the statement, an aggressive forecast signaling to a stronger economic recovery could support Sterling.
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Commodity spotlight – Gold
The mounting expectations over a probable US interest rate hike in December have enforced downside pressures on Gold with prices struggling to keep above $1210. This zero-yielding metal remains gripped by US rate hike expectations while a strengthening Dollar continues to sabotage any upside gains. It seems like a technical bounce could be pending which may offer another foundation for bearish investors to pounce. If sellers manage to break below the stubborn $1210 support, then the gates could be opened towards $1200 and potentially lower.
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