29 September, 2016
Volatility increased significantly on Wednesday despite the lack of economic releases today. However, all eyes were turned on OPEC meeting along with crude oil inventories during the U.S trading session.
Surprisingly, OPEC has agreed to cut production for the first time in eight years sending Oil higher more than 5% and breaking above $47 per barrel. The deal will become effective by the beginning of November and should give strong support for Oil prices at least in the near-term as investors may begin to re-adjust their med-term price targets.
In the equity market, the dow added 100points following the news while the German DAX broke above 10500 points erasing the majority of its weekly losses.
Looking at the FX Market and especially commodity currencies, we have seen a big jump in Canadian Dollar, New Zealand Dollar and the Aussie.
Beginning with USD/CAD, the pair failed to break above 1.3280/1.3300 monthly resistance zone and turned sharply after prices dropped below 1.3194 support. The pair has reached a high of 1.3278 following crude oil inventories release before the sell-off begin. The move was fast because of the surprise effect following the output-cap deal and by now the pair the outlook has become strongly bearish in the short-term.
Technically, momentum indicators turned negative and a continuation lower is likely in the coming hours. Regarding the next levels of interest, the selling pressure should send prices to as low as 1.3000 psychological support while a recovery towards 1.3155/1.3172 zone is likely to cap any rally attempt.
To conclude, as far as 1.3225 peak is intact in the hourly chart, the trend should stay bearish.
The Australian Dollar remain one the strongest currencies this year and a new rally towards 2016 peak is likely in the following days.
Looking at the recent price action, the pair continue to respect the higher lows structure seen from 0.7150 support, consequently, the preference should be to the upside. In the hourly chart, as far as 0.7640 low is in place, the pair should continue to gain ground in the direction of 0.7730 resistance while a drop to 0.7675/60 support zone should find strong buyers.
After falling to a low of 0.7232 earlier today, the kiwi managed to bounce strongly on the back of OPEC recent deal. From a technical standpoint, the pair remain overbought in the near-term and as long as 0.7320 high is intact, we expect prices to keep trading sideways until a clear breakout above the mentioned above resistance level happens.
In the opposite, a daily close below 0.7210/20 support zone should confirm a change in the short-term positive trend.
Crude Oil (WTI)
Oil rallied more than 5% reinforcing the scenario of a double bottom patter near $44.20 per barrel. In the meantime, prices succeeded to overtake a major resistance level located at 46.50 level, which may clear the path for further advance in the direction of 47.75 barrier.
In the other side, a move to 46.50 may offer fresh long opportunities for bulls and therefore this former resistance is likely to turn as a support in the coming hours.
From a wider angle, Oil is trading sideways in the weekly chart and only a clear break above $51.00/51.75 per barrel will confirm that prices have bottomed for this year and a big recovery can be expected in the coming months. In the meantime, if we look at the theoretical target of the recent double bottom reversal pattern, we can see that 48.90 represents this price objective and coincide with a former resistance level.
To summarize, Oil outlook turned positive for the time being and the recent rally can extend to as high as $49 per barrel as far as 44.20 low is in place.
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