WTI oil futures in uptrend but rally shows signs of exhaustion
WTI oil futures are at their highest level since July 2015 after a strong rally took prices above the key 57.00 level, hitting as high as 57.66. The short-term trend is clearly to the upside but the market has become overextended. This is indicated by the RSI on the 4-hour chart, which is now above 70 in overbought territory.
As the rally appears to be exhausted, the market is likely to consolidate in the near term and possibly pull back towards support at 57.00. Breaking below this key level would place prices under pressure to slip back towards 54.00. From this point, further weakness can be expected, with scope to target 49.00, a level that was approached a month ago.
Trend indicators on the 4-hour chart remain bullish. The 20 and 50-period moving averages are sloping upwards, while Ichimoku cloud analysis is showing positively aligned Tenkan-sen and Kijun-sen lines.
The uptrend is still in progress with no signs of a reversal yet, although momentum has slowed. The current consolidation phase is deemed corrective and the bullish bias is expected to remain strong in the near term.
GBP/USD stuck in a one-month range; strong support at key 1.30 level
GBP/USD has maintained a neutral bias during the past month after declining from the high of 1.3656. Strong support is provided at the key 1.3000 level.
Near-term risk is tilted to the downside as GBP/USD continues to trade below the 50% Fibonacci retracement level of the up-leg from 1.2773 to 1.3656. This level at 1.3215 will act as immediate resistance. A move above the 38.2% Fibonacci (top of the current range) at 1.3318 is needed to weaken downside pressure and shift the market’s focus to the upside for a re-test of the 1.3656 high. From here the market would see a resumption of the longer-term uptrend.
A daily closing below 1.3000 would bring more softness for GBPUSD to shift it out of neutral to a bearish phase to target the 1.2773 low.
In the meantime, the market is expected to continue to trade in a range in the short-term, and likely at the lower end of the one-month range. The oscillators reflect a lack of clear direction. Both RSI and MACD are currently neutral.