Oil prices drop as recession worries intensify

The USD remained relatively stable yesterday against a number of its  counterparts, as Fed Chairman Jerome Powell’s testimony before the US Congress was hawkish yet within the market’s expectations. In his testimony the Fed Chairman stated that the bank is strongly committed in curbing inflationary pressures in the US economy while also noted that a recession is a possibility. Overall the Fed’s path to avoid a possible recession may still be possible yet may at the same time prove to be a difficult one. US stockmarkets ended their day with low volatility being also under pressure from the market’s worries maybe with the exception of Nasdaq that slipped a bit yet recovered the lost ground during today’s Asian session. Oil’s price tumbled yesterday as recession fears tended to intensify also worries for the demand side of the commodity, while it should also be noted that the US President Biden asked Congress for a gas tax holiday to lower fuel prices at petrol stations. At the same time it should be noted that the API crude oil inventories reading for past week, showed a considerable rise of oil inventories which may have also played a detrimental part in oil’s price as it may imply a slack in the US oil market where, production surpasses demand levels, while today we get the EIA crude oil inventories figure for past week. Today we note for EUR traders the release of the preliminary PMI figures for June and should their readings drop if compared to May, we may see the EUR weakening as the drop would imply a slowdown of the expansion of economic activity in the Area. The heavyweight of the release is to be on Germany’s manufacturing sector which is also considered the locomotive of Eurozone’s economy. EUR traders may keep an eye out for ECB President Lagarde which is to attend the EU Council meeting and could make some statements. From Norway, we note Norgesbanks’ interest rate decision and we would expect the bank to stick to the script and hike rates in the coming meeting as it remained on hold in the last one and CPI rates accelerated further. It’s interesting to see whether the bank’s forward guidance will be tweaked more to the hawkish side, a scenario which could provide some support for the NOK. Last but not least on a more exotic note, we would like to see how the Central Bank of Turkey will behave also today. The bank has maintained its one week repo rate at 14%, with inflation for May accelerating further and reaching 73.50% yoy, while Turkey’s President Erdogan warned that his government will try to lower interest rates even further. Should the bank actually maintain rates unchanged once again we may see the Lira starting to weaken. Should the bank show intentions of cutting rates further, we may see the Lira weakening substantially practically sending the Turkish economy in a negative spiral.  

WTI’s price dropped breaking the 103.00 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the commodity’s price as long as its price action remains below the downward trendline which was incepted on the 14^a. of June. Please note that he RSI indicator remains near the reading of 30, which also tends to imply a rather bearish sentiment of the market for the commodity. On the other hand we must note that the price action has reached the lower Bollinger band which could provide some stabilisation for the oil’s price maybe even a correction higher. Should WTI’s price remain under the selling interest of the market, we may see it aiming if not breaking the 97.40 (S1) support line in search of lower grounds. Should the commodity find fresh extensive buying orders along its path we may see it breaking the 103.00 (R1) resistance line clearly and continue higher aiming if not breaching the 110.30 (R2) level.

USD/TRY maintained a tight rangebound movement between the 17.6000 (R1) and the 17.0000 (S1) levels. We tend to maintain a bias for a sideways movement given also that the RSI indicator remains near the reading of 50, yet we note that the exotic pair could erupt to the upwards should CBT’s interest rate decision be dovish enough. Should the bulls actually take charge we may see the pair breaking the 17.6000 (R1) line and aim for the 18.3000 (R2) level. Should TRY traders get excited by CBT’s interest rate decision on the other hand, we may see the pair breaking the 17.0000 (S1) support line and aim for the 16.5000 (S2) level.

WTI H4 Chart

Support: 97.40 (S1), 92.60 (S2), 87.35 (S3)

Resistance: 103.00 (R1), 110.30 (R2), 116.00 (R3)

USD/TRY H4 Chart

Support: 17.0000 (S1), 16.5000 (S2), 15.7400 (S3)

Resistance: 17.6000 (R1), 18.3000 (R2), 19.0000 (R3)

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