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EUR/USD fails to regain parity, US durable goods orders up next. Oil extends gains after Saudi Arabia hints at output cuts & ahead of EIA data.
 

EUR/USD fails to regain parity

EUR/USD bounced yesterday following weaker-than-expected US PMI data, which resulted in investors pairing back bets of an aggressive Federal Reserve. EUR/USD rose to a high of 0.9970 but notably failed to retake 1.00.

Today the pair is falling again after hawkish comments from Federal Reserve President Neel Kashkari who warned about the risk of underestimating price pressures. His comments are the largest in a string of hawkish Fed rhetoric ahead of the Jackson Hole Symposium which kicks off tomorrow. Any dovish pivot from the Fed is looking unlikely.

The threat of an imminent recession in Europe as the energy crisis continues is keeping the euro out of favor.

Given that it is expected to take until 2025 for Germany to be free from all exposure to German gas, the impact of the war could go on for years. There is little doubt that the war has caused huge damage to the German economy and a quick bounce back is off the cards.

US durable goods orders are due later today as well as pending home sales.
 

Where next for EUR/USD?

EUR/USD has been trending lower since August 11 before running into support at 0.9904, taking the RSI into oversold territory. This level is immediate support. The rebound from the 0.99 2022 low ran into resistance at the 20 sma 1.00 and has since fallen lower again.

Sellers need to break below 0.99 to extend the bearish trend.

Buyers will be looking for a move over the 20 sma and 1.00, the psychological level to bring  1.0120 the 50 sma into play.

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Oil extends gains ahead of EIA data

Oil rallied 4%, extending those gains ahead of the European open. The jump higher in oil prices came after Saudi Arabia hinted at possible output cuts to stabilize the market.

The Saudi energy minister’s comments caught the market off guard and came after oil prices have dropped in recent weeks. However, other sources from OPEC also said that any output cuts would not be imminent, taking the wind out of the rally.

Instead, production cuts would likely coincide with the return of Iranian oil to the market. Talks to revive the Iran nuclear deal continue with Iran reportedly softening its position. Should a deal be agreed then sanctions on Iranian oil could be lifted. Whilst there appears to be some optimism of a deal being reached, this is definitely not the first time that reports of progress have surfaced. 

EIA data is expected to show that inventories fell by 1.5 million barrels. API data showed a larger-than-expected draw, highlighting tightness in the market.
 

Where next for oil prices?

Oil prices are extending the rebound from 85.00, the 2022 low, retaking the 20 SMA, and the multi-month falling trendline. This and the bullish crossover on the MACD keep buyers hopeful of further upside.

Buyers will look for a move over $95 to expose the 50 sma at 97.50.

Sellers will look for a move below 91.20 the 20 sma to open the door to 88.35 the July low and $85 the 2022. A break below here is needed to extend the bearish trend.

(Click on image to enlarge)

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