Charts Of The Day: Oil spikes

Market Analysis / 4 Min Read
Milan Cutkovic / 06 Jul 2021

HIGHLIGHTS:

  • Oil prices spiked on Monday after it became clear that OPEC+ talks won´t resume
  • With US markets closed on Monday, European indices continued their consolidation
  • GBP regained ground and with COVID-19 restrictions set to be lifted, the UK economy could see another boost
  • Increased volatility in oil markets is impacting the FX market, with NOK pairs worth watching

Oil Markets - OPEC

Oil prices spiked on Monday after it became clear that OPEC+ talks won´t resume for now. So, unless there is eventually a last-minute agreement, the OPEC members and its allies will not hike their output in August, which could lead to tight supplies and add to the existing inflation concerns; in this scenario, USOIL could easily reach the $80 level. However, all member states are aware that such an outcome could have serious and long-lasting consequences and lead to another price war. It therefore appears more likely that a compromise will eventually be reached.

USOIL has exceeded the July 1st high and is marching towards the $76 resistance level. Imminent support is seen in the area between $73.75 and $73.85, followed by the rising trendline from the late May low. Strong support is noted at $71.60, where buyers would likely emerge in larger numbers.

Currency Markets

US markets remained closed on Monday, while European indices continued their consolidation. The GER30 is trading within a triangle, and a breakout appears to be imminent. The FOMC meeting minutes and a series of economic data out of the Eurozone countries could lead to larger price swings mid-week. A breakout to the topside may pave the way for a continuation of the rally towards 15,800 points. On the other hand, should GER30 breach the lower trendline, it would signal a correction towards 15,272 points.

The British Pound managed to regain some ground and GBP bulls are anticipating that the remaining COVID-19 restrictions will be lifted in two weeks, which could give the UK economy another significant boost. Whether the Pound can sustain its rally against the US Dollar might primarily depend – in the short-term at least – on the FOMC meeting minutes on Wednesday and the upcoming economic data out of the UK.

Looking at the charts, there are some hints that GBP/USD could see a recovery in the near-term. The RSI on the daily chart is showing a positive divergence, and the currency pair is slowly marching towards 1.3875 resistance. A clear breakout above this level would then pave the way for a test of the 1.40 level – the next major hurdle for GBP bulls.

Increased volatility in oil markets is having an impact on the FX market too, and the NOK pairs are some worth watching. USD/NOK failed again to reach the 200 DMA and traders will be keeping a close eye on the 8.45 support level. A daily close below this level would pave the way for a deeper correction towards the May low at 8.1476.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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