13-Apr-2020

1) EUR/USD in Confusion between Broken Trend Lines
2) GBP/USD: Downbeat UK GDP Forecast Cap Upside in Sterling
3) Historic OPEC+ Deal Saves Oil from Free Fall but Does Not Promise Fast Growth

1) EUR/USD in Confusion between Broken Trend Lines

EURUSD is in a state of confusion on the daily chart as the pair shows no clear direction, moving instead back and forth between two broken trend lines that seem to have regained some credibility over the past two weeks.

Currently, the momentum indicators are reflecting a neutral-to-positive bias for the short-term as the RSI is pushing efforts to climb above its 50 neutral mark, while the stochastic and the MACD continue to strengthen northwards.

A break above the 38.2% Fibonacci retracement of the latest rebound, which is currently keeping the pair under control at 1.0950, could open the door for the 23.6% Fibonacci of 1.1025. Higher, the bulls should overcome the previous peak of 1.1145 to extend the rally, though it would be interesting to see if the descending trendline stretched from 1.1411 can restrict upside corrections once again. In case the pair closes above 1.1145, there is an ascending trendline from 1.0878 that could come under the spotlight between 1.1200 and 1.1238.

On the downside, the 50% Fibonacci of 1.0890 and the 61.8% Fibonacci of 1.0830 may try to block the way towards the 1.0767 low, where the descending trendline from 1.1238 is also placed. If the price retreats below 1.0700 too, the bears would push towards the 1.0635 bottom, a break of which could clarify a downtrend in the bigger picture and set a new target somewhere between 1.0560 and 1.5000.

To put the market back in an uptrend, the price needs to rally above 1.1495.

Summarizing, EURUSD is in neutral mode in the short-term and only a break above 1.1495 or below 1.0635 would specify a bullish or bearish direction in the short- and long-term timeframes. In the meantime, to gain some extra ground, the price needs to rise above the 1.0950 resistance.

2) GBP/USD: Downbeat UK GDP Forecast Cap Upside in Sterling

GBP/USD gains some strong positive traction and breaks through the 1.2480-85 resistance. The coronavirus-led uncertainty could keep the US dollar better bid. European markets are closed on account of Easter Monday.

The GBP/USD pair finally broke out of its Asian session consolidation phase and spiked to one-month tops, around the 1.2530 region in the last hour.

A sustained move beyond the 1.2480-85 horizontal resistance turned out to be one of the key factors that prompted some aggressive short-covering move.

A subsequent strength beyond the key 1.2500 psychological mark might now be seen as a fresh trigger for bullish traders and supports prospects for additional gains.

Hence, some follow-through positive move, towards testing 50-day SMA around the 1.2585 region, now looks a distinct possibility amid some USD selling bias.

Meanwhile, the fact that technical indicators on the daily chart have just started gaining positive momentum further adds credence to the bullish outlook.

However, oscillators on hourly charts have already moved on the verge of breaking into the overbought territory and warrant some caution for aggressive traders.

The GBP/USD pair consolidated its recent move up to four-week tops and oscillated in a narrow trading band amid holiday-thinned liquidity conditions on Good Friday. The British pound was being supported by reports that the UK Prime Minister Boris Johnson had moved out of the intensive care. On the other hand, the US dollar was being weighed down by the Fed’s announcement on Thursday to provide up to $2.3 trillion of additional loans to support the economy.

The USD remained depressed following the release of softer-than-expected US consumer inflation figures, which showed that the headline CPI fell by the most in more than five years and contracted 0.4% in March. Meanwhile, the yearly rate eased to 1.5% and recorded the smallest advance since February 2019. Bulls, however, failed to capitalize on the supporting factors and refrained from placing any aggressive bets on persistent worries over the economic fallout from the coronavirus pandemic.

The pair finally settled around mid-1.2400s and managed to regain some positive traction on the first day of a new trading week amid persistent USD selling bias. In the absence of any major market-moving economic releases, either from the UK or the US, developments surrounding the coronavirus saga might influence the USD price dynamics and produce some meaningful trading opportunities.

3) Historic OPEC+ Deal Saves Oil from Free Fall but Does Not Promise Fast Growth

OPEC+ made a historic agreement. The price wars between Saudi Arabia and Russia are over, and this supported the oil. The new week starts with more than a 5% jump in oil quotations on promises of major producers to sharply reduce oil supplies in the coming months.

According to estimates of Saudi Arabia and Kuwait, in the next two months, Crude Oil producers will reduce production by 19-20 million barrels per day. In addition to the agreed cuts of 10 million barrels under OPEC+, some Gulf countries promise to voluntarily remove another 2 million barrels, G20 countries and the rest about 7 million more.

This was hard to believe a few months ago, but these cuts could be almost half the drop in real demand at the moment. Big countries-consumers may announce the start of oil purchases to their strategic reserves as soon as on Monday to support the market further and use the situation to buy at historically low prices.

The announced cuts are a psychological support factor, which can reduce market volatility. Investors have received an informal threshold: a drop of oil to $20 forms an area of support from both producers and consumers.

However, it should not be assumed that from now, the oil market will go up. And there are several reasons for that. Firstly, significant reserves have already been accumulated during the month of price wars and the global pandemic. However, supplies cut will start only in early May.

Secondly, world demand has collapsed twice as much as the agreed cuts by countries. Filling storage facilities, as the US experience showed earlier in March, may face bureaucratic delays.

Third, the recovery of global demand promises to be slow. China’s economy is willing but unable to fully restore its forecasted growth rates as it faced a demand collapse in Europe and the US.

A likely strategic win scenario for Russia, Saudi Arabia, and some other traditional oil exporters would be the ability to survive a period of depressed-low oil prices longer than companies in wealthier countries like the US, where the cost of pumping is higher. For oil prices, this could be the final point during a period of rapid oil price collapse. However, bulls should keep in mind that the steady growth of prices should be expected only at the signs of recovery in real demand.