Two trades to watch: GBP/USD, Oil

Energy
Fiona Cincotta
By :  ,  Market Analyst

GBP/USD rises as USD eases ahead of PCE inflation

GBP/USD is edging higher after steep falls in the previous session.

The pound fell after BoE’s Andrew Bailey warned that the UK economy would be hit harder than any other major economy.

The labour shortage from COVID and Brexit and the energy price shock sent GBP/USD to a two-week low.

The USD rose after hawkish comments from Fed Chair Powell, with the Fed committed to lowering inflation through hiking interest rates.

UK GDP confirmed 0.8% growth for Q1, in line with the previous estimate.

US PCE is in focus; expectations are for core PCE to ease to 4.7%, down from 4.9% YoY in May.

Where next for GBP/USD?

GBP/USD has been trending lower, forming a series of lower lows and lower highs across the year. It trades below the multi-month falling trendline, the 20 & 50 sma.

After finding a floor at 1.1935, the rebound stumbled at the 20 sma and headed lower once again.

The RSI is below 50, suggesting that there could be more downside to come.

Sellers will look for a move below 1.21, yesterday’s low, to attack 1.20, the psychological level, and 1.1935, the 2022 low.

Buyers will look for a more over the 20 sna at 1.23, exposing the 50 sna at 1.2410 to create a higher high.

gbpusd chart

Oil steadies ahead of OPEC+ announcement

Oil prices are holding steady in early trade after falling sharply yesterday. Central bankers making it clear that they a serious about fighting inflation raised fears of a recession dragging oil prices lower.

Overnight talks with Iran made no progress, with the US stating how disappointed they were at the Iranian effort to revive the deal. Meanwhile, political troubles in Ecuador and Libya continue to limit supply from those countries.

The EIA registered a 2.8 million barrel draw in inventories

Looking ahead, OPEC is due to announce its production plan for August. The oil cartel is not expected to make any changes to the production targets of 648,000 additional barrels per day agreed in the previous meeting.

Where next for oil prices?

Oil prices rebound from 101.39 retaking the multi-month rising trendline and the 50 sma before finding resistance at the 20 sma at 113.50.

The price has eased back, consolidating just below 50 sma and the multi-month rising trendline and finding support at 109.00, the April 18 high.

A fall below this level could open the door to a drop to 101.40, with a break below creating a lower low.

Buyers will look for a move back over the rising trendline and the 20 sma at 133.50. A move over 116.90 is needed to create a higher high.

 

oil chart
Related tags: Trade Ideas GBP USD Oil OPEC

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