Oil Out of Control. The OPEC Agreements Are Beginning to Look Bogus

Yesterday was a quiet day for statistics. The Swiss CPI met expectations: -0.3%; inflationary expectations in New Zealand were somewhat disappointing: 2.1%. The RBNZ’s will decide on the core interest rate on Thursday. Market expectations are 99.8% that the rate will stay the same at 1.75. We think that there are currently no reasons for easing monetary policy. The last inflation number was 1.7% and, given the consensus forecast and the latest expectations, the RBNZ will hardly take drastic steps in the foreseeable future.

In the United States, two FOMC members – Bullard and Kashkari, both Fed voting members – spoke. Unfortunately, we won’t be able to comment on the remarks in this article, but we will try to do so on Wednesday. Meanwhile, the scandal over Russia’s possible involvement in the US elections continues. This time the spotlight is on Chuck Grassley, the Republican chair of the Senate Judiciary Committee, who is trying to ramp up the investigation of the already overblown scandal. This looks somewhat strange to his Republican colleagues, but this “zeal” can be explained by Grassley’s heightened sense of responsibility. One way or another, the continuation of the scandal is, per se, bad news for the dollar. Yesterday the euro tried to recover some losses, bouncing off the 9-day moving average and starting to consolidate at 1.1800. Technically, if it breaks through the 9-day EMA at 1.1770, we can expect the bears to return in the short term. The JOLTS statistics for June, which come out today at 2:00 pm GMT, may support the bears on the EUR/USD pair.

The meeting of OPEC members in Abu-Dhabi is one of the crucial news items. Because compliance with last year’s agreement to cut production is dreadful, a number of statements that might affect the price of the black gold are possible. The Russian oil industry is in the cross hairs. The MICEX index rose yesterday. Technically a breakthrough of the neckline of the inverted head-and-shoulders is ending, but we would advise opening long positions only after a breakthrough and consolidation at 1970, where there is resistance in the form of a 38.2% Fibo correction from decline at the beginning of this year – this will make it possible to put out short stops and go in more safely.

Nikolay Dudchenko, exclusively for Olymp Trade

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