Weekly Report Monday 14 August 2017 – Friday 18 August 2017
WTI oil jumped strongly on Friday after unconfirmed reports of a shutdown of one of the largest oil refineries in the US eased concerns about global oversupply which kept oil prices under pressure for the most of the week. Despite strong rally on Friday, when WTI contract was up 3.7% for the day and made the biggest daily gain since July 25, oil ended week in bearish long-tailed Doji candle which suggests that immediate downside risk has been sidelined but also pointing to indecision.
Oil was pressured by oversupply concerns that offset the impact much strong than expected draw in u\s crude inventories last week (8.9 million barrels draw vs forecasted draw of 3.05 million barrels).
However, Friday’s strong bounce could but immediate threats of further fall in oil prices on hold and allow for further recovery, as technical studies regained traction and returned to firmer bullish setup.
Report from Baker Hughes, released on Friday, showing its weekly count of oil rigs operating in the United States last week fell by five rigs to a total of 763, adding on supports to oil prices on Friday.
Oil traders were also sensitive to overall risk-aversion on global markets after a terrorist attack in Barcelona and also focused recent developments in Washington, where ongoing tensions fueled concerns over the US administration’s ability to implement its political agenda.
Brent oil rallied on Friday and approached $53.00 barrier, supported by news, after weakness of last week was contained by psychological support at $50.00. Signs of higher low formation at $50.00 have been generated on strong bullish performance on Friday, as well as weekly close in bullish and long-tailed candle. Bullish scenario is also supported by positive studies on daily chart and fresh bulls towards next strong barrier at $53.62 could be anticipated.
Gasoline contract rose strongly on Thu/Fri and fully retraced losses posted earlier this week. Gasoline contract dipped to fresh nearly two-month low at $1.5364 on Thursday, but bounced quickly after strong support provided by daily Ichimoku cloud top contained weakness. Gasoline rallied despite much lower than expected draw in Gasoline inventories which fell by 0.02 million barrels last week against forecasted draw of 1.07 million barrels.
Spot Gold was down at the beginning of the week, depressed by stronger dollar and hit weekly low at $1267, where downside attempts on Tue/Wed were contained. Renewed risk aversion and cooled down expectations for US rate hike, boosted the yellow metal which managed to fully reverse earlier losses and dent strong resistances at $1292/96 and turn focus towards psychological $1300 target.
Gold rally was also supported by Himalayan confrontation between India and China who fought a brief, but bloody border war over the territory in 1962. India and China, the world's top two gold buyers, started a standoff two months ago when Indian troops confronted Chinese forces working on a road over the Doklam Plateau, a strategically important area near where Tibet, India and Bhutan meet, and which both China and Bhutan – an ally of India – claim as their own.
Gold a nine-month peak on Friday, hitting the $1300 barrier for the first time since November 2016, as a series of terrorist attacks in Spain on Thursday continued to support demand for traditional safe-haven yellow metal.
Positive sentiment remains despite gold price pulled back quickly after touching $1300 target, however, Friday’s bearish close in daily candle with long upper shadow and also weekly close in red, might signal stronger hesitation at key $1296/$1300 resistances and signal extended consolidation before fresh attempts higher.
Another eventful week is behind, with US dollar ending week positively with 0.4% gains against the basket of its major counterparts. The week started in positive tone for the dollar, as geopolitical tensions over North Korea eased, prompting investors back into riskier assets after strong risk aversion last week, when tensions raised. According to North Korean state media report, Korean president delayed decision on firing missiles towards US territory of Guam, which markets took as more rhetorical than real threats.
The greenback received another support on Monday from hawkish comments from influential NY Fed chief Dudley who said he would favor a third interest rate hike this year that further lifted dollar’s sentiment.
Better than expected release of US July Retail Sales (0.6% vs forecasted 0.4%) marked the largest gain in seven months, adding to dollar’s support on Tuesday. Stronger that forecasted retail sales numbers pointed to a rebound in consumer spending, lifting expectations of solid economic growth in the second half of the year.
Disappointing US housing sector data dampened optimism over the strength of the economy and pushed the greenback lower on Wednesday, offsetting positive impact from solid Retail Sales number the day before. US Building Permits fell by 4.1% in July, undershooting forecast at -2.0%, while US Housing starts registered even bigger fall on dip by 4.8% in July vs forecasted rise by 0.5%.
Key event for the dollar last week was release of minutes of Fed’s most recent monetary policy meeting, as markets were awaiting indications on another potential rate hike this year from the US central bank.
Policymakers voted to hold the target rate to a range of 1% to 1.25% but minutes showed split between FOMC members over when to raise interest rates. One group cited a low inflation environment while another worries over the price, reducing market hopes for another rate hike towards the end of the year. Low inflation remains the main obstacle for the Fed, with hopes that it will reach 2% target, but it was unclear when.
The greenback regained traction on Thursday and moved higher against its major counterparts, supported by the release of upbeat US economic reports, but political tensions in Washington continued to weigh.
Bigger than expected fall in US weekly Jobless claims and manufacturing activity in the Philadelphia region declined less than expected this month.
The dollar came again under pressure on Friday from persisting US political tensions and doubts over an additional rate hike by the Federal Reserve this year continued to weigh, while a terrorist attack in Barcelona triggered fresh risk aversion in the markets.
The greenback ended trading on Friday in red, but overall picture for the week was positive.
British pound fell sharply against dollar on Mon/Tue, depressed by weaker than expected Inflation data from the UK. Consumer prices rose 2.6% compared with a year earlier, falling below expectations for a 2.7% annual rise that eased pressure on the Bank of England to raise rates.
Sterling managed to stabilize after strong fall, after UK jobs data provided fresh support for the currency. The UK unemployment rate fell to its lowest since 1975 at 4.4% falling below forecast at 4.5%, while average weekly earnings rose by 2.1% year on year in the three months to June, beating forecast for an increase of 1.8% and up from 1.9% in the three months to May.
Cable traded within 1.2840/1.2900 range in the last three days of the week, unable to break strong support provided by daily Ichimoku cloud, but also with limited upside, as technical studies and overall sentiment remain negative.
Cable ended week in red, marking the third straight bearish week, registering weekly loss of 1%.
The USDJPY pair rose in the first two days of the week, as dollar was boosted and hit weekly high at 110.94, but it was unable to clear important 111.00 resistance. Fresh weakness of the dollar that started on Wednesday was reinforced by renewed safe haven demand, pushed the price significantly lower. During the three-day fall which commenced on Wednesday, the pair pared all gains made on Mon/Tue rally and also cracked important support and last week’s low at 108.72.The pair ended week in Doji candle with long upper shadow which signals indecision but also downside pressure after strong upside rejection earlier in the week and keeps bias lower, supported by negative technicals.
Australian dollar ended week in green, with weekly action being shaped in long–tailed weekly candle, which is seen as bullish signal. The Aussie rallied at the beginning of the week, supported by minutes of RBA’s last policy meeting, which repeated central bank’s warning on rising household debt as a macro-economic risk, but suggested above potential economic growth was possible ahead without signalling any change in its steady interest rate views.
Australian dollar received support from strong Australian employment data, released on Thursday, as report showed the number of employed people increased by 27,900 in July, beating expectations for a 20,000 gain.
The unemployment rate in Australia hit 5.6% in July from 5.7% in June, in line with expectations.
The Euro ended last week in red against the dollar and was in descend since Monday, when it stalled just under previous week’s high at 1.1846. Despite bearish alignment, the pair stayed above strong support at 1.1680 and ended Friday’s trading positively, which could signal extended consolidation while 1.1680 support holds.
The Euro came under pressure from firmer dollar and release of downbeat EU Industrial Production on Monday, which rose by 2.6% in June, below forecasted 2.8% rise.
In addition, weaker than expected German Q2 GDP data (0.6% vs 0.7% forecast), added on the pressure on the Euro.
The single currency received some support from weaker dollar on Friday, but stayed with congestion established in past four days.