Sterling WTI and gold in focus

November 16, 2017 11:25 AM

Sterling modestly appreciated on Thursday morning, after UK retail sales rose by 0.3% MoM in October – a figure above market expectations. However, retail sales declined by -0.3% when compared to a year ago which was the first annual fall since 2013. With the report potentially fanning concerns over the health of the UK consumer and sU.S.tainability of Britain’s consumer-driven economic growth, Sterling’s upside may be limited. The bearish sentiment towards the British Pound remains intact, as the growing uncertainty over Brexit talks and political risk at home, weigh heavily on the currency.

Sterling edged higher following the retail sales report, with prices trading around 1.3190 as of writing. From a technical perspective, it is all about the 1.3150 level which could act as support or resistance. SU.S.tained weakness below 1.3150 may encourage a decline towards 1.3050 and 1.3000. Alternatively, an intraday breakout above 1.3230 may open a path back towards 1.3300.

Are oil bulls losing steam?
WTI Crude prices were shaky and somewhat vulnerable on Thursday, despite investor expectations of OPEC extending production cuts to stabilize markets.

The damage created from the IEA downbeat outlook for oil demand can still be seen in the commodity’s price action while Wednesday’s EIA report has market players pondering over how OPEC deals with rising production of U.S. shale. Much attention will be directed towards the OPEC meeting on 30 November which could play a role in where the commodity concludes this year. While an extension to the OPEC production cut deal may support oil markets, the question is for how long? With OPEC already forecasting slower growth in demand for its crude and predicting that U.S. shale output will grow faster than expected in the next four years, “extraordinary measures” may be truly needed to rebalance markets.

Taking a look at the technical picture, the sharp depreciation witnessed on Wednesday, has brought WTI bears back into the game. SU.S.tained weakness below the $55 level may encourage a further decline towards $54.10.

Commodity spotlight – Gold
Gold found itself on a rollercoaster ride this week as the fierce battle between bulls and bears raged on.

The yellow metal jumped to a three-week high at $1,289 during Wednesday’s trading session, before tumbling lower after upbeat U.S. data reinforced expectations of a U.S. rate hike in December. While a touch of investor caution and ongoing concerns over delays in U.S. tax reforms continues to inspire Gold bulls, bears have been fueled by rising expectations of higher U.S. interest rates. Price action suggests that the metal is stuck in a sticky range, with a catalyst needed for the next big move. Looking at the technical picture, $1,280 continues to act as a pivotal level. SU.S.tained weakness below $1,280, may encourage a further decline towards $1,267. Alternatively, a daily close above $1,280 is likely to inspire bulls to challenge $1,289 and $1,300 respectively.

About the Author

Lukman Otunuga is an FXTM research analyst