(Slobodan Drvenica – Windsor Brokers)
WTI oil price remains under pressure and holding near new seven-month low on Wednesday, following short-lived recovery attempt on Tuesday, which stalled at $90 zone.
The price action holds in red for the fourth straight day, driven by fresh negative sentiment of renewed concerns about global economic growth, as prospects of a global recession warn that demand for oil would weaken.
The most recent data from China showed that industrial production and retail sales unexpectedly slowed, adding to concerns about the recovery of the world’s second largest economy and the biggest oil importer from the slowdown in the second quarter and a narrow escape from contraction is running out of steam.
The negative sentiment was additionally fueled by unexpected and strong fall of the US Empire State Manufacturing Index which fell to the lowest since May 2020.
Positive signal from the US API report on Tuesday which showed a drop in crude inventories was offset by overall negative sentiment and made no significant impact on oil prices.
Technical studies on daily chart show moving averages in full bearish setup and rising negative momentum, while repeated close below broken Fibo support at $88.42 (61.8% of $62.42/$130.48 upleg) boost negative signal.
Also, completion of failure swing pattern on weekly chart add to bearish tone, with weekly close below $88.42 pivot to confirm.
Although bears are in control, oversold stochastic and headwinds from former high at $85.39 (Oct 25 2021) may slow the action for extended consolidation before bears resume towards targets at $80 (psychological) and $78.48 (Fibo 76.4% of $62.42/$130.48).
Broken Fibo support at $88.42 reverted to solid resistance which should ideally cap, with extended upticks to stay under $90.00/$90.36 (psychological / daily Tenkan-sen) to keep bears intact.
Res: 87.67; 88.42; 90.00; 90.36.
Sup: 85.71; 85.39; 81.89; 80.00.
Bank of New Zealand with another rate hike
(Daniel Kostecki – Conotoxia)
The Reserve Bank of New Zealand today raised its main interest rate by 0.5 percentage points to 3%, a level is last seen seven years ago. It was the fourth 50-basis point hike in the current cycle, which may make the RBNZ one of the stronger monetary tightening central banks to bring down inflation.
Today’s hike was in line with market expectations. Some policymakers believe that inflation may soon begin to stabilize or even start to decline through lower fuel prices and transportation prices. However, inflation may not return to the New Zealand central bank’s target until mid-2024.
Thus, further monetary tightening may be required, with its end expected in the first quarter of 2023 – according to a statement issued to today’s decision. As a result, the RBNZ may raise the main interest rate by about 3.75 percentage points throughout the cycle, to 4%, from the record low of 0.25% that occurred in 2021. Inflation in New Zealand rose to 7.3% y/y in the second quarter of 2022, up from 6.9% in the previous period. This was the highest figure since the second quarter of 1990.
The NZD/USD exchange rate seemed to react relatively calmly to the above decision, as it was in line with the market consensus. At 07:30 GMT+3 on the Conotoxia MT5 platform, the NZD/USD exchange rate rose by 0.25% to 0.6360. As a result, at this hour, of the major currencies against the US dollar, it is the NZD that seems to have gained the most. Since the beginning of the month, the NZD has gained 1.10% to the USD, which may make New Zealand’s currency the strongest of the world’s major currencies.