Oil drops after OPEC fails to impress, while cable drops on polls!
The British pound managed to secure a place as one of the worst performing major currencies against the greenback after losing ground on a recent poll showing UK PM Theresa May’ head falling. Oil also followed suit on negative sentiment following the OPEC deal.
Investors were hoping for deeper cuts at the OPEC gathering in Vienna that also included some non-OPEC producers. A deal was reached to extend a current output cut agreement by another nine months, taking it to March 2018. This was already priced in by the markets as it was clearly telegraphed before the May 25 meeting. A failure to agree on a bigger reduction in supplies caused some disappointment to investors and led to oil prices falling. WTI oil tumbled below the key $51 a barrel level to reach $48.23 .
The cable is adding to Thursday’s losses against the dollar following the disappointing release of UK GDP data, Cable fell below the key 1.2900 level and to 1.2775 on Friday. This fall was the result of a YouGov poll, showing a reduction in the Conservative party’s lead over Labour. The UK general election is less than two weeks away on June 8.
The yen gained after data showed Japan’s core consumer prices rose for a fourth month in April, the longest run of gains since mid-2015. The dollar erased all of Thursday’s gains versus the yen and fell to a late Asian session low of 110.87 yen today.
Gold benefited from a broadly weaker dollar and rose in Asia towards the key $1269.34 an ounce level.
GBP/USD Weekly Outlook
GBP/USD's sharp fall last week indicates short term topping at 1.0347 on bearish divergence condition in 4 hour MACD. Break of the near term channel also suggests completion of rise from 1.2108. Initial bias remains on the downside this week for 1.2614 resistance turned support first. Break there should also indicate completion of whole consolidation pattern from 1.1946 and target a retest on this low. Meanwhile, above 1.2926 minor resistance will turn focus back to 1.3047 high instead.
In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. The rejection from 55 week EMA is maintaining bearishness in the pair.
Also, at this point, as long as 1.3444 resistance holds, fall from 1.7190 is still expected to continue. Break of above mentioned 1.2614 support will affirm this bearish case.
In the longer term picture, no change in the view that down trend from 2.1161 is still in progress. On resumption, such decline would extend deeper to 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532.
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