Two trades to watch: EUR/USD, WTI oil

EUR/USD consolidates around 1.18, ECB strategy report & US jobless claims in focus. WTI oil looks to OPEC+, EIA inventories for further clues.

Charts (5)

EUR/USD consolidates ahead of ECB strategy report, US jobless claims 

EUR/USD holds steady ahead of the European session consolidating around 1.18 after three straight sessions of heavy losses. 

The minutes from the Federal Reserve June policy meeting confirmed that the central bank is moving towards tapering its asset purchases, potentially as soon as this year. Although policy makers also said that more progress towards economic recovery was needed first. 

Reports are also swirling that the ECB have agreed to raise their inflation goal to 2% and allow for overshoot when needed. 

Christine Lagarde is due to speak on the ECB’s pricing strategy. 

US initial jobless claims are expected to show a steady decline to 350k, down from 364k and a new post pandemic low. 

Read more about what the FOMC minutes revealed.

Where next for EUR/USD? 

EUR/USD has traded under pressure since the start of June. The pair trades below its descending trend line, below its downward sloping 50 & 100 sma on the 4 hour chart, in an established bearish trend. 

The pair briefly broke below the key 1.18 level yesterday hitting a low of 1.1781 a multi-month low. The pair has since picked up and it attempting to retake 1.18. The RSI is firmly in bearish territory, although points higher giving some mixed signal. 

Any meaningful move higher needs to break above 1.1835, yesterday’s high, failure to break higher here would keep the bearish bias in place and further downside could be expected. A break below today’s low of 1.1790 could see the pair move lower to 1.1760 horizontal support ahead of 1.17 round number. 

A move above 1.1835 could open the door to 1.1850 a level which has offered both support and resistance over the past 3 weeks. 1.1860 could also offer resistance, the descending trendline support and 50 sm. It would take a move above 1.1880 for the buyers to gain traction. 

 

Oil awaits further clues from OPEC+, EIA inventories 

Crude oil remains depressed as uncertainty surrounding OPEC+ production outlook weighs on sentiment.  

Failure of the group to agree to a output increase has raised questions about co-operation in the group boosting concerns of a price war breaking out for market share, echoing last year’s incidence. 

Dollar strength following the FOMC minutes is adding to the negative tone surrounding WTI. 

Weekly EIA inventory data will be in focus. Yesterday the API report indicated a 8 million barrel draw in the previous week. Should the EIA data confirm this, this could offer some support to oil prices. 

Where next for crude oil? 

After touch a 3 year high on 6th July, oil has traded under pressure. Oil has fallen through its 21 day sma, before finding support on the ascending trendline dating back to November. 

The bearish crossover on the MACD is supportive of further declines. 

Any move lower would need to break below 7070, yesterday’s low and ascending trendline support in order to attack support at 70.00 the key psychological level ahead of 69.00 the 50 sma. 

Any recovery would need to retake the 21 sma at 72.44 and horizontal resistance at 74.40 in order to look back towards 76.00 and the 2018 high at 76.88. 

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