Oil markets have been moving quite rapidly in the last few days with the bulls looking to claw back some gains on the back of many fearing that the market is oversold. This should come as no surprise as the recent bearish push has been quite aggressive and hardly stopped to breath in the last month. Many are expecting a slight recovery in prices to potentially stall at present, as the recent Oil inventory data today came in with a minor surplus at 0.12M (-2.25M exp). In addition to this, higher oil prices drive US shale producers further into overdrive to pump more oil, despite the large volume of oil globally that is sitting in storage. All of which will weigh heavily on OPEC which is trying to get prices higher, while fighting of other oil producing nations. One thing is clear that even if OPEC can step into the market and push prices higher, it could be euphoria for a brief period of time as we’ve previously seen and the market could quickly ignore it all together. However, what is clear is that the market remains quite unhedged and still very bearish at present.
On the charts the rally has thus far pushed up close to resistance at 45.17 and is looking like it may take a breather around this area, unless we see further panic from traders. The key level at 45.48 could also potentially slow down any further movements. For me though the 20 day moving average is something traders wont ignore as it has been a pivotal point before. Currently we are sitting just below it and further movements higher would hit resistance and dynamic resistance from the moving average all of which could swing the bears into action. When looking at support it’s likely to be found around 42.48, which is looking like it may be the point where markets think twice.
The NZD has been flying high recently on the back of positive economic sentiment for the NZ economy and the fact the Reserve Bank of New Zealand has been looking to be accommodative with monetary policy. This in turn has led to renewed support in the Kiwi, but also that interest rates are likely to rise by the end of the year if inflation data continues to be strong, and the fiscal position of the government is positive. Markets will also be looking out today for the ANZ business confidence report which is expected to be positive given the recent developments in the economy. A positive report will send it higher, while any jump lower could send the kiwi tumbling in the short term.
On the charts the bullish trend is quite hard to argue with, and the trend is very much your friend. The next large level of resistance at 0.7380 has previously been quite strong and it likely to hold up under pressure, unless we see further positive news on the economic front. Expectations are that this may continue and we could see further extensions to 0.7450.