- EUR/GBP moves higher to 2-day highs near 0.9040 on Tuesday.
- The sterling loses ground on the back of further USD-buying.
- UK’s Services PMI, BoE meeting next of relevance in the docket.
The now better tone around the greenback is forcing both the sterling and the European currency to give away initial gains, prompting EUR/GBP to climb to fresh weekly peaks in the 0.9040 region.
EUR/GBP looks to data, BoE
EUR/GBP has managed to regain composure around recent lows in the 0.8980 region, retaking the key 0.90 barrier and beyond in a context of the continuation of the dollar’s recovery following July’s steep sell-off.
In fact, the quid is so far suffering the brunt of the dollar’s rebound, therefore underpinning the upside momentum in the cross. Other than that, market participants keep monitoring the progress of the economic re-opening on both sides of the Channel, while EU-UK trade effervescence remains absent (postponed?).
Earlier in the session EMU’s Producer Prices rose 0.7% from a month earlier in June and contracted 3.7% over the last twelve months. In the UK, the always-relevant Services PMI is due on Wednesday ahead of the BoE event on Thursday followed by Governor A.Bailey’s press conference.
EUR/GBP key levels
The cross is gaining 0.38% at 0.9029 and faces the next hurdle at 0.9148 (monthly high Jul.27) followed by 0.9175 (monthly high Jun.21) and finally 0.9324 (2019 high Aug.12). On the downside, a breach of 0.8980 (weekly low Jul.31) would expose 0.8937 (monthly low Jul.10) and then 0.8864 (monthly low Jun.9).
The Malaysian ringgit is expected to appreciate to the 4.15 area vs. the greenback at the beginning of the next year, according to FX Strategists at UOB Group.
“USD/MYR grinded lower across July from 4.29 to 4.25, reflecting a broad USD decline and also encouraging signs that activity is picking up locally.”
“Bank Negara Malaysia delivered another 25 bps rate cut in July, bringing the benchmark interest rate to a record low of 1.75% to provide additional policy stimulus to accelerate the pace of economic recovery.”
“With the worst of Malaysia’s economic woes probably over in the 2Q, the steady pace of recovery of its economy and the MYR is likely to solidify in the coming quarters. We update our USD/MYR forecasts to 4.20 in 3Q20, 4.18 in 4Q20, and 4.15 in 1Q21 and 2Q21.”
- GBP/USD met resistance near 1.3100 and lost its traction.
- Concerns over rising coronavirus cases in the UK weigh on the GBP.
- US Dollar Index stays relatively calm near mid-93.00s on Tuesday.
The GBP/USD pair spent the Asian session moving sideways around 1.3080 and inched higher during the early trading hours of the European session. However, the pair lost its traction after peaking above 1.3100 and came under strong bearish pressure. As of writing, GBP/USD was down 0.37% on a daily basis at 1.3023.
GBP on the back foot ahead of BoE
The lack of progress in Brexit talks and resurfacing fears over a second coronavirus wave in the UK forcing shutdowns make it difficult for the GBP to find demand. On Monday, Britain's health ministry reported that they have confirmed 938 coronavirus cases, which was the second-highest daily increase since early June. Currently, the total number of positive COVID-19 test results in the UK stands at 305,623.
On Thursday, the Bank of England will announce the interest rate decision and release its policy statement. Previewing this event, “we still expect the BoE to express caution over the highly uncertain economic outlook given the risk of further disruption from a second COVID wave, and the risk of another hit to growth later this year when the job furlough scheme expires in the autumn,” said analysts at MUFG Bank.
On the other hand, the greenback is staying resilient against its peers with the US Dollar Index posting modest daily gains above 93.50 and not allowing GBP/USD to stage a rebound. The ISM-NY's Business Conditions Index and the IBD/TIPP's Economic Optimism will be featured in the US economic docket on Tuesday.
Technical levels to watch for
- EUR/JPY looks firm and test the 125.00 level, or daily peaks.
- The dollar now reverses the initial drop and weighs on the euro.
- EMU Producer Prices rose 0.7% MoM and dropped 3.7% YoY in June.
After briefly testing daily tops in the 125.00 area, EUR/JPY sparked a correction lower to the current 124.80 region, keeping modest gains for the day so far.
EUR/JPY looks to risk trends
EUR/JPY has reversed the negative start of the week and gained around a cent from Monday’s lows in the 124.00 zone.
The now pick-up in the sentiment around the greenback continues to put the European currency and the rest of the risk complex under pressure, in turn motivating the cross to abandon the upper end of the range.
In the meantime, the risk appetite trends continue to dictate the sentiment in the global markets, with the pandemic, the economic recovery and fresh US-China jitters (this time around the mobile app Tik-Tok) taking centre stage for the time being.
Data wise in the euro docket, Producer Prices in the broader euro region rose at a monthly 0.7% and contracted 3.7% on a year to June, both prints coming in above estimates.
Later in the NA session, the IBD/TIPP index is due seconded by Factory Orders for the month of June.
EUR/JPY relevant levels
At the moment the cross is gaining 0.13% at 124.78 and faces the next up barrier at 125.20 (2020 high Jul.31) followed by 126.80 (monthly high Apr.17 2019) and finally 127.50 (2019 high Mar.1). On the other hand, a breach of 122.87 (monthly high Jan.16) would expose 121.14 (monthly high Mar.25) and then 120.03 (200-day SMA).
Silver has reached the 26.02/11 2011-2012 lows. Initial failure here suggests the rally looks overextended and analysts at Commerzbank would exit any remaining longs.
“We would allow for a corrective set back to the 23.6% retracement at 22.80 and the 38.2% retracement at 20.67 (of the move from March). We also have the 21.17 September 2019 high in this vicinity. Provided dips lower hold over the four-month uptrend at 19.26, an upside bias will be reserved.”
“Above 26.14 will target initially 27.42, the 38.2% retracement of the move from the 2011 peak. And then the 50% retracement at 31.71 of the same move.”
- USD/CAD rose above 1.3400 ahead of American session.
- WTI fails to build on Monday's gains, retreats toward $40.
- US Dollar Index recovers above 93.50 on Tuesday.
The USD/CAD pair registered small losses and closed at 1.3390 on Monday. Although the pair continued to edge lower during the first half of the day on Tuesday, it reversed its direction in the last hour and was last seen gaining 0.15% on a daily basis at 1.3408.
Eyes on mid-tier US and Canada data
The renewed selling pressure surrounding crude oil seems to be making it difficult for the commodity-related loonie to stay resilient against its rivals on Tuesday. Ahead of the American Petroleum Institue's Weekly Crude Oil Stock report, the barrel of West Texas Intermediate (WTI) is down 1.3% on the day at $40.24.
On the other hand, the US Dollar Index is starting to push higher ahead of the American session, allowing USD/CAD to cling to its modest daily gains.
The US economic docket will feature ISM-NY Business Conditions Index and IBD/TIPP Economic Optimism data on Tuesday. Moreover, the IHS Markit will release its Manufacturing PMI report for Canada. Market participants expect the economic activity in Canada's manufacturing sector to continue to contract in July. If the data surprises to the upside and arrives above the 50 threshold, we could see the CAD gather strength and drag USD/CAD lower.
Technical levels to watch for
USD/JPY is currently recovering above the 106.00 threshold after having traded as low as 105.83 but overall maintaining a positive stance. The pair is short-term bullish but capped by selling interest aligned around 106.45, FXStreet’s Chief Analyst Valeria Bednarik reports.
“News that the US Congress has been unable to reach a deal over the next aid-package is hurting the American currency. Meanwhile, coronavirus concerns remain the same. The number of new cases in the US has been receding, but remains around 50K per day.”
“Japan published July Tokyo inflation, which came in better than expected, up by 0.6% YoY, while the core reading surged 0.4%, both better than anticipated. The US session will bring minor figures, June Factory Orders and the August IBD/TIPP Economic Optimism.”
“The 4-hour chart shows that the USD/JPY pair continues to develop above a firmly bullish 20 SMA, while technical indicators resumed their advances within positive levels. Still, the pair remains below a bearish 100 SMA which capped the upside on Monday.”
“Further gains are to be expected only once beyond the 106.45 area, with scope then to advance to the 107.00/10 area.”
As tensions mount between China and the US and as fears of a second wave increase in parts of Asia and Europe, economists at Rabobank are of the view that the rush to sell USD is overdone. They expect a EUR/USD pullback to the 1.16 zone in the coming weeks.
“Given concerns over a second wave of coronavirus and fears about what that could do to the global economy in addition to rising China tensions, we see risk that the recent rush to unload USDs may have extended too far.”
“The world’s need for dollars almost certainly means that there will be a scurry to secure USD funds on any further breakdown in market confidence.”
“We expect a pullback towards the EUR/USD 1.16 area in the weeks ahead.”
The S&P 500 Index has cleared the price resistance at 3279/81 to bring the high-level consolidation phase to an end. Economists at Credit Suisse look for a test on the top of the key February price gap at 3328/38.
“The S&P 500 has maintained the positive tone set on Friday and has now cleared its recent ‘reversal day’ high and price resistance at 3279/81 to bring the high-level consolidation phase to an end.”
“Although the rally is seen lacking momentum, we look for strength to extend further with resistance above 3303 seen next at 3318 and then more importantly at the top of the February price gap at 3328/38. We continue to expect this to remain a major barrier for a fresh consolidation phase to unfold beneath here. A direct break though would be seen clearing the way for a challenge on the 3394 record high.”
“Support moves higher to 3285 initially then 3272/71, which we look to try and hold to keep the immediate risk higher. A break would warn of a retreat back to the 13-day average and price support at 3246/41, but with fresh buyers expected to show here.”
Gold has reached Commerzbank’s target of $1983. Strategists at the bank expect the yellow metal to experience some profit taking as forays above are seen short-lived. On the flip side, the 55-day ma at $1838 is a solid support.
“Gold has reached the top of its 49 year channel at $1983. It represents our long-term target. This should hold the initial test and provoke some profit-taking.”
“Forays above $2000 are expected to remain short-lived. Above $2000 we have a point and figure target of $2030 and a Fibonacci extension to $2088.”
“Support is offered by the 55-day ma at $1838 and the five-month uptrend at $1829. Below 1829 lies the $1765 May high. This guards the $1670 June low.”
Strategists at UOB Group gave their opinion on the perspective for the precious metal in the next months.
“Since last year, we have maintained a positive outlook for gold due to expectations of “lower for longer” interest rates.”
“Gold has since staged a strong rally over the past month, pushing its way above our quarterly longer term forecast of USD 1,850 / oz by 2Q21. With this latest rally, gold has broken above the previous peak of USD 1,920 in Sep 2011. In terms of technical outlook, we note that “the upward momentum is strong and the focus is at USD 2,000. Next resistance of note above USD 2,000 is around USD 2,040 followed by USD 2,100”.
“Fundamentally, the various positive drivers for gold price, particularly that of the massive central bank easing remain as strong as ever. However, we note that long positioning in gold has become extremely crowded with ETF tonnage rising to yet a new record high. As such, there is now an increasingly speculative element in gold’s price action with larger intra-day swings as traders are positioned for gold to trade above USD 2,000 / oz.”
“Overall, we take this opportunity in the monthly to make an interim upgrade to our gold forecast but warn that with current crowded long positioning, gold may be priced for perfection and will be ripe for profit taking should expectations of near zero interest rates suddenly reverse or financial markets succumb to another round of USD liquidity crunch, similar to what happened in March. Our new forecast for gold is now USD 2,000 / oz for 3Q20, USD 2,100 / oz for 4Q20 and USD 2,200 / oz for 1Q21 and 2Q21.”
- NZD/USD is fluctuating in a tight range on Tuesday.
- US Dollar Index posts small daily losses below 93.50.
- Unemployment Rate in New Zealand is expected to rise to 5.8% in Q2.
The NZD/USD pair closed the first day of the week with small losses and is now struggling to make a decisive move in either direction. As of writing, the pair was virtually unchanged on a daily basis at 0.6612.
On Monday, the broad-based USD strength witnesses during the first half of the day caused the pair to edge lower. With the 10-year US Treasury bond yield losing more than 2% on Tuesday, the US Dollar Index dropped into the negative territory and was last seen down 0.1% on the day at 93.42.
In the second half of the day, the ISM-NY Business Conditions Index and the IBD/TIPP Economic Optimism data will be looked upon for fresh impetus.
More importantly, Statistics New Zealand will release its labour market report in the early trading hours of the Asian session on Wednesday. Market participants expect the Unemployment Rate in the second quarter to rise from 4.2% to 5.8% with the Employment Change declining by 2%. Better-than-expected jobs figures could provide a boost to the kiwi and help NZD/USD erase Monday's losses. On the other hand,
NZD/USD near-term outlook
“Yesterday, we held the view that NZD ‘could test the strong support at 0.6600’ but ‘a sustained decline below this level is unlikely’. NZD subsequently dropped to a low of 0.6575 before rebounding," FX strategists at the UOB Group said. "While downward pressure is not strong, there is scope for NZD to retest the 0.6575 level before a more sustained recovery can be expected. Resistance is at 0.6630 followed by 0.6650.”
Technical levels to watch for
- EUR/USD has resumed the upside and flirts with 1.1800.
- Further gains could now extend to the 2020 high beyond 1.19.
Following an ephemeral test of the sub-1.17 area on Monday, EUR/USD has now regained buying interest and clinched tops in the 1.18 neighbourhood, although losing some impetus soon afterwards.
The pair looks firmer and there is now room for another visit to the YTD peaks just above 1.19 mark ahead of the psychological yardstick at 1.2000.
Looking at the broader picture, as long as the 200-day SMA, today at 1.1093, holds the downside, further gains in EUR/USD remains well on the table.
EUR/USD daily chart
- DXY has resumed the downside following the 2-day bullish attempt.
- Yearly lows in the mid-92.00s are expected to be re-visited soon.
The rebound in DXY from levels last seen in May 2018 in the 92.50 region appears to have met a tough hurdle in the 94.00 neighbourhood (Monday).
Sellers look to have regained the upper hand so far on Tuesday, forcing the dollar to resume the downside in the very near-term. That said, the next support of note is now at the 2020 lows near 92.50 (July 31). A deeper pullback should meet the Fibo level (of the 2017-2018 drop) at 91.92 ahead of the May 2018 low at 91.80.
The negative outlook on the dollar is expected to remain unaltered while below the 200-day SMA, today at 97.98.
DXY daily chart
GBP/USD has been attempting a recovery amid some dollar weakness but rising UK COVID-19 cases and lack of improvement in international relations are set to send sterling down, Yohay Elam, an analyst at FXStreet, reports.
“Thursday's announcement of new restrictions affecting around 4.3 million people, talk of a lockdown in London remains prevalent. Whitehall officials claim it is only a worst-case scenario, but the mere idea of slapping new limitations on one of the world's financial capitals is weighing on the pound.”
“Sterling is also suffering from the lack of progress in Brexit talks, nor in trade negotiations with the US. International Trade Secretary Liz Truss is in America, for talks with Robert Lighthizer, the US Trade Representative. Expectations remain low.”
“Sino-American relations are also tense, with the recent row focusing on TikTok and its potential for holding sensitive information. ByteDance, the owner of the social media firm will likely be forced to sell TikTok, potentially to Microsoft. The world's largest economies are also at loggerheads over Hong Kong, where Britain has an interest as well. Any further worsening of relations between Beijing and London could weigh on the pound.”
“Speculation about the NFP and an update on US COVID-19 cases and deaths have the potential to down the dollar, countering pound weakness.”
S&P 500 futures met supply following rejection at the 3,300 level, undermined by the shift in the risk sentiment amid US fiscal wrangling and coronavirus concerns. With the latest leg down, the path of least resistance appears to the downside ahead of the US open and macro data.
S&P 500 Futures: Key resistances and supports
The Technical Confluences Indicator shows that the S&P 500 futures are defending the 3,289 support, which is the confluence of the Fibonacci 38.2% one-day, previous low four-hour and SMA50 15-minutes.
In absence of significant support levels, the US futures will directly test the 3,275/70 demand area, where the previous week high, pivot point one-week R1 and SMA10 four-hour intersect.
A failure to resist above the latter will likely expose the critical support at 3,251, the convergence of the previous year high and pivot point one-day S2.
Alternatively, the buyers could probe the 3,303 (previous day high) barrier on a break above the 3,300 level.
Further north, the hurdle awaits at $3306/08, where the previous high four-hour and pivot point one-week R2 coincide.
The next powerful resistance is aligned at 3,327, the pivot point one-month R1.
S&P 500 Chart
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The Confluence Detector is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.
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Quek Ser Leang at UOB Group’s Global Economics & Markets Research gives his views on the prospects of the US Dollar Index (DXY).
“We first detected the weakness in USD Index two months ago. In the… update from 03 Jun 20 when USD Index was at 97.45, we stated clearly that ‘the outlook for USD Index is negative’ and that ‘the next support level of note is at 95.50’. USD Index subsequently dropped to 95.72 and traded sideways. When USD Index broke 95.50… we held the view that ‘the current movement is the next leg lower within USD Index overall down-trend’. At that time, we noted that the 6- year rising trend-line at 94.30 is a critical support. We highlighted that ‘the overall technical readings clearly point to a weaker USD in the months ahead’ and added, ‘a break of the critical support is not something to be trifled with especially when we are hard pressed to identify a nearby support level of note’.”
“USD Index cracked the 94.30 critical support last Monday (27 Jul) and within the span of a few days, hurtled lower to a low of 92.55 on Friday (31 Jul) before recovering to close lower by a whopping -4.15% at 93.35, its biggest 1-month decline in a decade.”
“The question from here is whether USD Index can maintain the current furious pace of decline as weekly RSI is already at its most oversold levels since early 2018. That said, downward momentum is still powerful and the next support is not until 91.50. This level is another critical support as it is not only at a rising trend-line that started from 2011; it is also near the bottom of the monthly Ichimoku cloud. While a break of the critical support is not ruled out, oversold conditions on the weekly chart suggest the 2018 low of 88.25 is not likely to come into the picture, at least for the next 1-2 months. The round-number of 90.00 is acting as a relatively strong support ahead of 88.25. On the upside, resistance is at 96.30 followed by the moving averages at 97.65. The latter level is acting as a solid resistance and could remain intact, possibly for the next several months, if not longer.”
- EUR/JPY is reversing Monday’s pullback and challenges 125.00.
- The 2020 peaks around 125.20 emerges as the next target.
EUR/JPY leaves behind the pessimism at the beginning of the week and is now flirting with the key barrier at 125.00 the figure.
The underlying positive stance in the cross remains well and sound, with occasional bearish moves deemed as corrective only. Against this, EUR/JPY is expected to re-visit the YTD tops in the 125.20 region in the short-term horizon, while bouts of weakness are predicted to meet contention in the 122.90 region.
Looking at the broader picture, the outlook on EURJPY is seen as constructive while above the 200-day SMA, today at 120.03.
EUR/JPY daily chart
Tuesday's 4-hour chart is showing a dead-cat bounce, implying further falls for the GBP/USD pair, which is trading around 1.3070 after rising from lows near the 1.30 level, FXStreet’s analyst Yohay Elam reports.
“Pound/dollar has risen from the lows near 1.30 but failed to stage a meaningful recovery. This ‘dead cat bounce’ pattern – as well as setting lower highs – is pointing to weakness. Moreover, GBP/USD has failed to recapture the uptrend channel that characterized it last week.”
“On the other hand, momentum remains positive and the cable is holding above the 50, 100, and 200 Simple Moving Average. Overall, the bears are in the lead, but bulls have not thrown the towel.”
“Resistance awaits at 1.3110, the daily high, followed by 1.3170, last week's peak. The next lines to watch are 1.32 and 1.3270.”
“Support is at the daily low of 1.3050, then Monday's trough of 1.3005. It is followed by 1.2975 and 1.29.”
- USD/JPY erases losses but recovery lacks follow-through.
- USD weakness and cautious trading in equities cap the upside.
- All eyes on risk trends and US Factory data for fresh impulse.
USD/JPY is attempting a recovery from daily lows of 105.83 but the bulls lack follow-through amid ongoing weakness in the US dollar across its main competitors.
The cautious trading seen in the European equities combined with the drop in the S&P 500 futures also limits the recovery attempts in the spot just above the 106.00 level.
The greenback comeback stalled and the selling bias resumed as the coronavirus resurgence continues to cast a cloud on the economic recovery prospects, especially after the upbeat US ISM Manufacturing PMI threw some rays of hope.
Meanwhile, the impending US fiscal stimulus deal combined with falling US real yields keep the USD sellers alive and kicking.
On the JPY-side of the equation, the yen traders ignored the domestic macro news while drawing some support from the Bank of Japan’s (BOJ) Governor Haruhiko Kuroda’s recent comments.
Kuroda said early Tuesday BOJ may consider extending a March 2021 deadline for lending facilities aimed at channeling funds to companies hit by the coronavirus pandemic. This came amid rising new infections across Japan, with Tokyo – the worst hit.
Next of relevance remains the US Factory Orders and virus data for near-term trading opportunities in the major. The sentiment on the global stocks amid stimulus expectations will also have a significant bearing on USD/JPY.
USD/JPY technical levels
“In a case where the USD/JPY prices cross 106.60, 107.55 and July month top close to 108.15 will grab the market attention. Meanwhile, a daily closing below 10-day SMA level of 105.82 can take rest on 105.30 before revisiting the five-month lows near 104.20,” explains Anil Panchal, FXStreet’s analyst.
USD/JPY additional levels
During July, the Turkish lira weakened against the US dollar from 6.8523 to 6.9608. Risks remain skewed to the downside for the lira due to a worsening current account balance and rates cut by the CBoT. Therefore, economists at MUFG Bank expect a higher USD/TRY pair for the rest of the year.
“While the COVID demand shock has helped to improve current account balances in many emerging market economies, it has not been the case in Turkey. The current account deficit has widened sharply in recent months to its highest level since the 1H 2018 in the run up to the currency crisis in the summer of that year.”
“The CBoT’s decision to aggressively cut rates leaves the lira vulnerable as well. It has driven the real policy rate deeper into negative territory as inflation is holding up better than expected to the negative demand shock. The annual rate of headline and core inflation both accelerated to 12.6% and 11.6% respectively in June. It prompted the CBoT to revise higher their year-end inflation forecast for this year to 8.9%. It further reduces the likelihood of more rate cuts.”
“If the lira continues to weaken, it will begin to increase pressure on the CBoT to reverse rate cuts. In these circumstances, we expect the lira to continue weakening in the year ahead.”
In July, the Brazilian real, benefitted by the improvement of external and domestic markets, appreciated against the US dollar from 5.4394 to 5.1851. The improved political and economic outlook may lead the USD/BRL to the 5.10 level by year-end, according to economists at MUFG Bank.
“A kind of truce among the branches of power as the lack of polemic statements coming from the Executive didn’t reverberate negatively either at the Congress or Supreme Court.”
“One of the reasons for the economic recovery is the re-opening of the economy in several parts of Brazil, although the pandemic is still far from control, but it has stabilized at a high level.”
“The better political/economic environment improved the popularity of the president as around 30% assess the government positively. Altogether, the political noise and odds for the presidential impeachment almost vanished. Last but not least, Congress resumed the economic agenda prioritizing at this moment two bills: a tax reform and new natural gas sector regulation. The tax reform is very complex and it will take several months of discussion, but the important point is that Congress is still prone to advance the economic agenda after the Covid-19 crisis and the several tensions with the Executive.”
“Taking into consideration all these issues and considering the pandemic under gradual control along the second half, there is room for BRL appreciation to our forecast of 5.1000 by the end of 2020.”
- Silver is teasing a symmetrical triangle breakout on hourly chart.
- Upside appears more compelling amid a lack of healthy resistance levels.
- Hourly RSI trades above 50.00, supporting the bullish case.
Silver (XAG/USD) is on the verge of a range breakout after it consolidated above $24, within a symmetrical triangle formation on the one-hour chart this Tuesday.
A break above the falling trendline resistance at $24.37 will validate the pattern, opening doors for a test of the upside target at $25.57.
Ahead of that level, the spot could test the psychological resistance of $24.50. The next hurdle awaits at $24.95, the intersection of July 29 and August 3 high.
The hourly Relative Strength Index (RSI) holds steady above the midline, backing the case for the upside.
While to the downside, the $24.28 level offers strong support, which the convergence of the rising trendline support, 21 and 50-HMAs.
Selling pressure will intensify on a break below the latter, calling for a test of the horizontal 100-HMA at $24.06.
The next cushion is placed near $23.80, where the 200-HMA and the triangle lowest point.
Silver: XAG/USD hourly chart
Silver additional levels
During July, oil prices oscillated in a remarkably narrow range, ending the month slightly higher (Brent +5.2% MoM; WTI +2.5% MoM) with the pulse of global oil markets stuck in a range bound environment, given the push-and-pull between the virus and the reopen. Strategists at MUFG Bank see oil price risks skewed to the downside this summer and forecast Brent trading at $36/b and $46 by end-Q3 and Q4, respectively.
“Macro vulnerabilities stemming from a resurgence of the virus in the US, lagging global jet fuel growth, an expected slowdown in Chinese oil imports, headwinds to normalising activity in countries where the virus remains under control and heightened geopolitical animosities between the US and China, all amalgamated together, signals a likely lid on prices with broadly range bound activity expected in the third quarter, with oil price risks skewed to the downside.”
“We expect the amalgamation of more tepid demand growth and the clearance of the large inventory overhang, to induce an upside cap in oil prices for the rest of 2020 – we forecast Brent ending Q3 and Q4 at $36/b and $46/b, respectively.”
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