Oil market is in desperate state: US producers keeping ramping up production while Middle East swept in political woes greatly undermining rebalance outlook. Prices plummeted 5% as EIA busted hopes that commercial stockpiles shrunk in the US, reporting an increase by 3.3M barrels. The forecast was a decline by 3.464. Prices demand more action from oil producers which are acting increasingly out of synch since coordinated action is impossible due to looming political crisis.
Oil market may remain sensitive to the OPEC efforts to stop the rout by verbal interventions, while medium term outlook remain bearish as hedge funds may withdraw from bullish positions they have recently built up. Net position on oil hasn’t changed according to CFTC, as in the week ending in July 2 speculators added only 800 contracts to 373.8K contracts. Prices are expected to extend plunge with short-term target at 44.50 level.
I have some feeling that Pound prepares for a big jump as it demonstrates quite resilient reaction despite rumors that lead narrows between Conservatives and Labour party. Latest poll showed May runs ahead of competitors by only 1% while Pound remains stable near 1.2900 level. Elections are due on June 8 and May is expected to gain enough seats in parliament to push through her key Brexit initiatives.
Trading target for GBPUSD is 1.31 level.
Tomorrow is ECB meeting and Draghi will probably start to drop some hints on exit policy timeframe. Underlying inflation in the Eurozone remains below the target but sustainably increasing while business and consumer sentiments improve, reports show. I expect that on the briefing Draghi will mention the need to withdraw from low rates and swelled balance sheet triggering Euro advance.
Trading recommendation for Euro is BUY with target at 1.1350 level.