Fxequity

Brent Crude (LCOc1), S&P 500 INDEX (SPX) & GBP/USD – FinTwit Developments to Watch


FINTWIT ANALYSIS

  • OPEC month-to-month report largely unchanged, bullish technical setup.
  • SPX earnings season slowdown, Fed taper and month-to-month seasonality.
  • GBP at essential juncture each basically and technically.

OPEC HOLDING BACK SUPPLY MAY SUSTAIN HIGH BRENT CRUDE PRICES

OPEC launched its month-to-month oil market report for November this week which didn’t comprise any main revisions from the earlier report, leading to minimal brent crude worth motion. Key highlights pf the report embrace:

  • 2021 world demand revised decrease by +/-0.2 mb/d.
  • 2022 world oil demand progress stays unchanged at 4.2mb/d.
  • In line with OPEC, anticipated progress in non-OPEC provide permits for them to take care of its present gradual unwinding of provide (helps preserve present costs).

BALANCE OF SUPPLY AND DEMAND

OPEC balance of supply and demand

Supply: OPEC

The chart above exhibits the availability and demand imbalances so far in 2021. The development of extra demand is more likely to proceed as we spherical off 2021 nevertheless, the margins are more likely to cut back as provide will increase and demand is anticipated to drop. Anticipated drops in demand from each China and India as a consequence of excessive costs might weigh negatively on brent crude going froward.

BRENT CRUDE (LCOc1) DAILY CHART

brent crude daily chart

Chart ready by Warren Venketas, IG

The each day brent crude chart above could also be suggestive of a bull flag pattern (blue), historically representing a continuation of the sooner uptrend. Final week noticed an unsuccessful take a look at of the $80.00 assist stage which concurrently broke beneath flag assist. The each day candles didn’t shut beneath flag assist thus abandoning two long lower wicks (bullish indication). A affirmation shut beneath flag assist might counsel additional draw back and probably concentrating on subsequent assist ranges.

From the bullish perspective, a break above flag resistance might deliver the $86.65 resistance stage into consideration.

Key resistance ranges:

Key assist ranges:

  • $80.00
  • 100-day EMA (yellow)

S&P 500 INDEX SLIPS AFTER ALL-TIME HIGHS

Earnings season within the U.S. has given SPX bulls the a lot wanted stimulus to hit report ranges final week however has since dissipated as Fed taper discuss and the potential for ahead of anticipated tightening in 2022. This doesn’t bode properly for the SPX constituents long-term as the present accommodative surroundings might soften forward of time.

So far we’ve got witnessed a exceptional feat of 82% of earnings coming in above estimates based on Refinitiv – see graphic beneath. With extra to come back, the index might even see consequent highs ought to this development proceed; a possible end result as prior outcomes have revealed the flexibility of U.S. corporations to switch the price of inflation onto the tip shopper.

SPX scorecard

Enhance your stock market knowledge with our articles on the kinds of shares obtainable, how equities affect the economic system, and getting began with inventory buying and selling.

The bullish argument is additional augmented by historic developments as seen within the chart beneath. November tends to offer vital features in comparison with different months of the yr barring April together with decrease volatility. The volatility facet holds true in 2021 and solely time will inform if the SPX will reside as much as its status of outperformance in November.

SPX monthly historic performance

SPX DAILY CHART

SPX daily chart

Chart ready by Warren Venketas, IG

Current wading in and across the longer-term trendline (black) might proceed as earnings season develops. Month-to-date (MTD) the index is already up 0.95%, nonetheless beneath the historic common of +1.50% albeit a tough guideline. This being stated, SPX has been fairly prolonged to the upside and has not too long ago come out of overbought territory on the RSI so the present drop in worth might push decrease in the direction of trendline assist.

Key resistance ranges:

Key assist ranges:

UK ECONOMIC DATA MAY KICKSTART HAWKISH PRESSURE NEXT WEEK

Pound sterling has been in free fall because the Bank of England (BoE) shock charge announcement final week. The U.S. dollar has concurrently gained traction as a safe-haven play (Evergrande) and a rise within the coverage tightening debate. Thursday this week noticed weak UK GDP knowledge including to the depreciation in opposition to the dollar. Subsequent week, UK inflation might spark a restoration for the pound ought to precise knowledge are available in increased than anticipated – see calendar beneath.

UK GDP UK economic calendar

Supply: DailyFX economic calendar

The December BoE assembly as outlined beneath has markets pricing in a 51.65% chance of a charge hike at 0.35%. I foresee this share chance determine to escalate because the assembly attracts nearer in December. The reasoning behind this the persistent inflation rhetoric being sustained with world provide constraints and elevated vitality costs unlikely to abate throughout this era. This could result in a stronger GBP, however the greenback faces related motivating components that favor USD energy. The distinction between the Fed and BoE when it comes to charge hike paths (timeline) might sway courtesy to sterling short-term because the Fed is more likely to solely hike in 2022 (probably 2023) whereas the BoE might announce a hike within the December assembly.

BoE RATE HIKEPROBABILITY

BoE rate hike probability

Supply: Refinitiv

Article 16 as detailed in the write-up by my colleague Justin McQueen has introduced an extra damaging haze across the pound. The potential for a commerce battle between the EU and UK might be catastrophic for the forex and progress on this matter ought to be monitored carefully.

GBP/USD DAILY CHART

GBP/USD daily chart

Chart ready by Warren Venketas, IG

For a lot of 2021 GBP/USD has been buying and selling inside a downward channel (black) as proven within the each day chart above. Channel assist is being known as into query as soon as extra. Can this decrease trendline maintain? We’ve got seen marginal breaks beneath trendline assist in March 2021 however has since held agency in opposition to bearish stress. The elemental financial knowledge ought to give some directional bias to the pair subsequent week which I consider ought to see some uptick in GBP/USD worth motion.

The Relative Strength Index (RSI) helps this notion within the type of bullish divergence which associated to a opposite motion within the RSI (inexperienced) relative to the underlying price action. In easy phrases, GBP/USD is forming decrease lows whereas the RSI displays increased lows (inexperienced). Usually this phenomena results in increased costs of the underlying asset however timeframe could be troublesome to foretell.

In abstract, there may be potential for additional draw back (short-term) however I consider this shall be restricted earlier than the a reversal in worth results in pound appreciation.

Key resistance ranges:

  • 1.3800
  • 1.3579 – 23.6% Fibonacci
  • 1.3412 – September swing low

Key assist ranges:

Contact and comply with Warren on Twitter: @WVenketas





Source link

Leave a Reply

Your email address will not be published.