US Oil – maintained recent ranges overnight, trading between $41.88 and $40.89 since the Friday close. The contract sits at $41.30 into the open. An oversupplied market, coupled with fading demand growth are expected to keep oil price gains contained going forward. Baker-Hughes reported a fifth straight week of increases in the U.S. oil rig count, while OPEC production is set to reach its highest this summer in July, according to a Reuters survey. Meanwhile, slowing demand growth, especially for refined products, along with high inventory levels, could see refinery feedstock demand slow in the coming months. Support now comes in at $40.57, Friday’s three-plus month low and 200 DMA. Friday saw a respite in the six day decline but weakness persists.
Meanwhile, USDCAD is on intra-day highs of 1.3085, dragged higher on weaker oil prices. Canada is on holiday today, so the lack of local liquidity could keep the CAD fairly volatile today. The pairing pulled back nearly 200 points on Friday, following the soft U.S. GDP data, the move going some way to clear out what was thought to be a crowded long USDCAD trade. With positions now a bit more neutral, USDCAD could become more sensitive to oil price losses.
Friday’s close was down to the 20 DMA and a breach and break of this level in the coming days will be required to trigger a SHORT position. A clear break of 1.3025, would see support and Target 1 at the 50 DMA , 38.2 Fibonacci level and lower channel at 1.2962, Target 2 would be at 1.2860 and coincide with a recovery in the Oil price and continued USD weakness.
The Monthly chart remains in a down trend from the February high at 1.4250 whilst the Weekly chart has been in an uptrend from the early June lows of 1.2764.
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