Oil Breaks Higher On Dollar Pullback

oil price

The week starts as it ended, with sentiment largely moving against the US dollar. From a technical perspective the greenback is simply following a falling resistance line, so weakness should perhaps be expected. Fundamentally however, it was perhaps Bernanke’s’ comments last week that will weigh heavier on the currency.

This week the major economic data kicks off with the latest Existing Home Sales figures from the US. Later in the week we also have Month on Month Durable Goods Orders and Initial Jobless Figures. Last months jobless figures unexpectedly rose, so it is keen interest that this months data will be watched. These could help to provide an indication of whether the expectation for a relaxation in monetary policy will be followed through by the Fed sooner rather than later.

A lot of Pacific based news dominates the calendar later in the week. Australian CPI figures and a New Zealand Dollar rate decision are sure to lead to at least some temporally volatility in these pairs. In particular watch for any hint of a rate reduction on the Kiwi’s currently high 2.50% yield.

Commodities should also be in focus this week with some good trading opportunities developing. Gold is nearing a key level of resistance following its recent rally from it lows, while Oil similarly has moved strongly higher and approaches key support. While some consolidation is likely, it would not be surprising if further price gains were seen in the upcoming sessions this week.

Key News This Week

Key market events for 22nd July

In Focus

EURUSD 220713

EUR/USD – Gains last week took the pair towards the 1.32 level where a reversal looks likely to occur. This level was rejected strongly at the start of last week. Although the pair looks currently bullish, we would expect at least a further temporary pull back which can be capitalised upon on with a Put trade close to the 1.32 level.

Currency Majors

USD/JPY – The pair managed to grind higher last week with the Japanese elections adding some weakness to the Yen. The pair has struggled to hold above 100.00 and the fundamentals currently point to more short term losses.
USD/CHF – In line with dollar weakness, the CHF pushed down the pair back below the 0.9400 level. However overall the technical picture shows a bullish bias and this is likely to signal that a low is in place. Position long with 0.9350 to prove support if needed.
GBP/USD – Defying expectations the GBP/USD has continued to push higher from its recent low. 1.5400 now looks a reasonable target and could cap the currency rally. 153.80 could prove to be a good place to position short.

Major Indices

DOW – The Index has reached new highs and may struggle to break the 15600 in the near term without a key event to fuel further gains. However longer term support is in place with both 15000 and 14600 likely to provided support on any pullbacks.
NASDAQ – The market has continued to move strongly higher, finding support for its recent pullback at 3300. In such a bullish market as present further gains are anticipated. 3500 is likely to provide strong support to additional gains this week.
FTSE – More gains on the UK index last week, posting back above 6600. 6500 could prove the new level for support on which further gains can be made. Look for a run at new highs once the market has first consolidated in the 6500-6750 range.

Commodities

Oil – Huge gains for oil last week saw the positive tone for the black saw gains extended above 108.00. With such strong gains it is likely that a pullback will occur before any additional gains are posted. 109-110 would be a good level to enter for a short term reversal.
Gold – Gold proved to be a big gainer last week on the back of a weaker dollar. Posting above $1300, the next level of resistance that will be important is the $1320 level. A move above here could signal the start of a move to prior resistance at 1340. A break there could see bigger gains.

Stocks

Watch for earnings reports from McDonalds at the start of the week.