Oil prices retain their gains

Oil prices maintained the gains made yesterday after the surprise oil production cut announced by the OPEC+ group and are threatening to go even higher, with analysts speculating, that the commodity’s price is to reach $95-$100 per barrel by the end of the year. Such a development could support inflationary pressures around the world, forcing central banks to tighten their monetary policy even further which in turn may have an adverse effect on economic activity and even cause a recession. Oil prices may get additional support should the US weekly readings show that the US oil market remains tight. We also note that the market may slowly but steadily start turning its attention towards the demand side of the commodity and the prospect of slowing manufacturing activity may not bode well with oil prices. It should be noted that the economic activity in the US has contracted once again reaching the lowest level post-pandemic according to the ISM manufacturing PMI figure for March, attributing to the weakening of the USD which was marked across the board yesterday. US stock markets were on the rise yesterday also boosted by the rise of oil companies, et we also note that Tesla’s shares tumbled, as profitability margin worries overshadowed the record high car deliveries of the automaker, while WSJ reported that McDonald’s is preparing layoffs as part of a restructuring plan, which under certain circumstances could provide a boost for its share price. We also note that US stockmarkets may be substantially affected should Fed policymakers actually sound hawkish enough. In the land of the down under, as was widely expected RBA remained on hold at 3.6% in an effort to try to assess the state of the economy and hinted that the cash rate may be reaching its peak in Governor Lowe’s accompanying statement. Also, we highlight the release of RBNZ’s interest rate decision and the bank is expected to proceed with a 25-basis points rate hike. Should the bank actually deliver the expected rate hike and should also the decision be accompanied by a hawkish statement we may see the Kiwi getting some support.

GBP/USD was on the rise yesterday nearing the 1.2465 (R1) resistance line. We tend to maintain a bullish outlook for cable as long as it price action remains above the upward trendline incepted since the 15 of March. Should the buying interest be maintained, we may see the pair breaking the 1.2465 (R1) resistance line and aim for the 1.2660 (R2) level. On the flip side for a bearish outlook we would require a clear break of the prementioned upward trendline in a first signal that the upward movement was interrupted, but also the pair to drop clearly below the 1.2270 (S1) support line and aim the 1.2115 (S2) support level, in a sign that a downward movement begins.

USD/CAD dropped yesterday, breaking the 1.3465 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair as long as it remains below the downward trendline incepted since the 24 of March. Also, note that the RSI indicator is near the reading of 30 highlighting the dominance of the bears yet may also be implying that the pair has reached oversold levels and is ripe for a correction higher. Should the bears maintain control as expected, we may see the pair breaking the 1.3335 (S1) support line and aim for lower grounds. For a bullish outlook, we would require a clear break of the prementioned downward trendline, signaling the change of the existing trend, a break of the 1.3465 (R1) resistance line and the pair to aim if not reach the 1.3560 (R2) resistance level.

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Today in the European session, we note the release of Germany’s trade data for February and Eurozone’s PPI rates for the same month. In the American session, we get Canada’s trade data and from the US the factory orders and the JOLTS job openings all being for February, while later on oil traders may be more interested in the release of the API weekly crude oil inventories figure. On the monetary front, we note that BoE MPC member Tenreyro, BoE Chief Economist Pill, Fed Board Governor Cook and Boston Fed President Collins are scheduled to speak. During tomorrow’s Asian session, we note that Cleveland Fed President Mester and RBA Governor Philip Lowe are scheduled to speak.