VOLATILITY HAS DECLINED, BUT BRITISH POLITICS REMAINS IN FOCUS
Volatility in the financial markets decreased due to the expectation of new drivers on the market. The fall of oil futures has led to a decrease in the likelihood of another interest rate hike in the US this year. This is due to the negative effects of the drop in fuel prices on the consumer price index in the US. We should note that the data showing a decline in crude oil inventories in the US by 2.5 million barrels compared to the anticipated decline by only 1.2 million barrels, could not change the reign of bears on the market. Statics on unemployment claims in America last week increased to 241 thousand met forecasts and didn’t have any significant influence on the course of trading. Investors keep monitoring the speeches of the FOMC members and are trying to figure out the possibility of another rate hike during this year.
The pound keeps consolidating amid uncertainty about negotiations of Theresa May with the EU concerning the terms of Brexit and the struggle of the Conservative party on forming a coalition in parliament. The current sideways movement may continue until the end of the week due to the lack of important data releases.
The New Zealand dollar gained positions today after the RBNZ confirmed positive forecasts on economic growth. The key interest rate has been left without changes at the level of 1.75%. Gold price is showing an upward movement on the backdrop of profit taking and the slight weakening of the USD.
Gold price is showing an upward movement on the backdrop of profit taking and the slight weakening of the USD.
The common currency price keeps consolidating near 1.1160 after the recent increase within the descending channel. Lack of new important events that are able to influence the mood of traders, resulted in the fall of volatility. Slight support for the price of EUR has come from better than expected data on consumer confidence in the Eurozone in June which came in at -1, compared to the expected figure of -3. Increases in the near future will be limited by the 1.1200 level; a breakthrough of that level may push the price further up to 1.1230 and 1.1280. On the opposite side, the closest support is located at 1.1100.
The GBP/USD is moving in a narrow range due to expectations of news on the forming of a parliamentary coalition and progress in the negotiations for Brexit. For the resumption of growth, quotes need to break through the angled resistance line and the important mark of 1.2700. In this case, the target levels will become 1.2800 and 1.2860. Long consolidation, with a decrease in amplitude of fluctuations, may lead to a strong movement afterward. To turn back to a drop, quotes need to overcome the support at 1.2600.
Oil traders decided that a decline in US oil inventories by 2.5 million barrels against the forecasted decrease by only 1.2 million barrels during last week is not enough to offset the negative influence of production growth in America. We should note that according to Baker Hughes, the growth in oil rigs count has continued for 22 consecutive weeks. Now the price of WTI is near the important 43.00 mark. It's breaking may result in a further rise up to the limit of the descending channel and resistance at 44.25. After hitting the SMA100 on the 15-minute chart, we may see the fall resumption with the first target at 42.20.
Confidence from the RBNZ in the future of the national economy cheered bulls. The rebound in commodities also gave support to the NZD/USD. Previously the quotes have left the limits of the triangle and the current increase is likely to continue until 0.7300. The signal of the trend change to negative may come from overcoming the strong support at 0.7190. Volatility will be restrained by the lack of new important events until the end of the week.
The lack of confidence in future growth on the US stock markets has forced portfolio managers to turn their attention to safe haven assets like gold. An additional plus for gold buyers has come from the depreciation of the USD. A slight decline in the probability of another interest rate increase in the US has had a moderately positive impact. To continue increasing, the price needs to fix beyond the boundaries of the descending channel, and only afterward will it be possible for the price to grow to 1270 and 1280. There is also a significant probability of the price drop to resume with the first targets at 1240 and 1230.
The USD/CAD price sharply declined today after the publication of a strong report on retail sales in Canada that is traditionally considered as a key macroeconomic indicator. The figure in April grew by 0.8% which is 0.5% more compared than the average forecast. Appreciation of the Canadian dollar was also due to the rebound of oil futures and the retreat of the greenback. Now the quotes are near the support at 1.3200 and its breaking may stimulate the bears to pull the price down further to 1.3165 and 1.3100. On the other hand, the RSI on the 15-minute chart is in the oversold zone that may become a reason for an upward rebound.