WTI/USD – Crude Close to 13-week Lows, US Numbers Sparkle

US crude has posted slight losses on Tuesday, continuing the downward trend which started late last week. In the North American session, WTI/USD futures are trading at $42.85. Brent crude is trading at $44.49, as the Brent premium stands at $1.64. On the release front, US key indicators looked sharp, as CB Consumer Confidence and New Home Sales both beat expectations.

There was positive news out of the US, which posted two key events on Tuesday. CB Consumer Confidence dipped to 97.3 points in July, lower than the June reading of 98.0, but nonetheless another excellent release. New Home Sales followed suit, jumping to 592 thousand in June. This figure easily beat the forecast of 560 thousand. There was more good news from the manufacturing sector, as the Richmond Manufacturing Index surged, posting a reading of plus-10 points. This crushed the forecast of minus-4 points.

Crude prices continue to lose ground. On Tuesday, the commodity has dipped below the $43 line and is close to its lowest level since mid-April. WTI/USD has plummeted 6.2% in less than a week. US crude inventory reports continue to point to declines week after week, but crude prices haven’t rebounded due to the oversupply of crude. Drilling activity in the US is on the upswing, as the number of US drilling rigs continues to increase. This is raising concerns that higher production levels in the US will exacerbate supply levels and push down crude prices towards the symbolic $40 level.

The ECB and BoE recently held the course on interest rates, the Federal Reserve is likely to follow suit. The Fed meets for a policy meeting on Wednesday and is widely expected to maintain current interest rate levels of 0.25% – 0.50%. However, with the US posting some solid numbers in the past few weeks, speculation has risen that the bank could raise rates before the end of the year. Another rate hike will be data-dependent, so if key indicators beat expectations, the likelihood of a rate hike will continue to increase. Still, there are some key factors which mitigate against a hike in the next few months. First, inflation remains stuck at low levels, well short of the Fed’s target of around 2 percent. Fed policymakers will be hesitant to raise rates if inflation is not projected to point upwards. Second, most of the recent data is from June, and does not fully take into account the Brexit vote on June 23. Fed members have expressed concern about the economic fallout from Brexit, and will want to review releases coming out in August and September in order to gauge the effects of Brexit.

WTI/USD Fundamentals

Tuesday (July 27)

• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.6%. Actual 5.2%
• 9:45 US Flash Services PMI. Estimate 51.2. Actual 50.9
• 9:59 US Richmond Manufacturing Index. Estimate -4. Actual +10
• 10:00 US CB Consumer Confidence. Estimate 95.6. Actual 97.3
• 10:00 US New Home Sales. Estimate 560K. Actual 560K

Upcoming Key Events

Wednesday (July 27)

• 8:30 US Core Durable Goods Orders. Estimate 0.3%
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <0.50%

*Key events are in bold

*All release times are EDT

WTI/USD for Tuesday, July 26, 2016

WTI/USD July 26 at 9:10 EDT

Open: 43.23 High: 43.28 Low: 42.37 Close: 42.85

WTI USD Technical

• WTI/USD was flat in the Asian session and posted slight losses in the European session. The pair posted considerable gains early in North American trade but has reversed directions and resumed a downward movement.
• 39.32 is providing support
• 43.45 is a weak resistance line

Further levels in both directions:

• Below: 39.32, 35.25 and 30.55
• Above: 43.45, 46.69, 50.13 and 53.50

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.