Oil markets continue to drift lower on the charts as the USD strengthens on the back of recent hawkish comments from the FED and in the build up to non-farm payroll this week. With the market expectation likely to be for a strong reading as the labour market has continued to deliver in the wake of expectations it will weaken. There has been calls internally from OPEC to support a production cut and moments ago Iraqi Prime Minister Haider Al-Abdai was looking to support an oil output freeze in an effort to stabilize prices and stop oil sliding any further, as the financial stress continues to be an issue for OPEC nations and even Saudi Arabia which is burning through cash reserves. The only issue for this is that many nations including Saudi Arabia have done this to fight of other oil producing nations and establish OPEC as a dominant player, however so far supply has not fallen at all and continued to increase in some regards, especially with Iran looking to boost production to 4.75 million barrels from 3 million and Libya which is rebuilding production as well. So a freeze may be some time off, especially with how fical OPEC can be internally.
Oil on the charts has been very bearish as of late and I expect it to continue to stretch lower in the short term as the bears have complete control. The next level of major support can be found at 45.78 and the expectation is that it will likely continue to slide lower to this level. If there is no output freeze then I would anticipate further sliding to 44.58 as the next level of support; beyond this level I would struggle to see further major gains unless market conditions change rapidly.
The Australian dollar has been looking weaker against the bears as of late as it struggled to gain any sort of traction on the charts. Data earlier in the week was lacklustre, but the recent building approval data was strong with a rise of 11.6% on the back of a rush for apartment approvals helping to boost the numbers. This comes on the back of the previous months data which showed a decline of -4.7% which worried economists as interest rates were looking to shift lower. Despite the good result it’s the USD strength which is driving markets at present, and the weak Australian economy has so far failed to find any sort of ground for future rate rises to encourage fixed interest traders.
On the charts the AUDUSD has been well and truly taken by the bears and is getting pushed through support at 0.7517 and the 38.2 fib retracement and testing the 100 moving average. A push through here will signal strong bullish momentum and we could see the AUDUSD slide lower to 0.7450 which is currently just below the 0.50 fib retracement level and likely to be the next major zone traders look to target. Either way while the USD continues to be the in-trade all eyes will be on the AUDUSD to see how much it can take before traders look to take some of those gains.