Talking Points:

- GBP/USD Losses to Persist as Near-Term Range Snaps Ahead of More BoE Rhetoric.

- Crude Oil Prices Risk Larger Correction as U.S. Field Outputs Approach Record-High.

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DailyFX TableGBP/USD

GBP/USD snaps the range-bound price action from the previous week, with the pair at risk for further losses amid the renewed threat of a ‘hard Brexit.’

Confidence in Prime Minister Theresa May appears to be eroding as Foreign Secretary Boris Johnson endorses a ‘red-line’ approach and argues that the U.K. government should stick to two-year transition period, which should last ‘not a second more.’ Signs of a growing rift within the Conservative party may continue to rattle the British Pound, but fresh rhetoric from Bank of England (BoE) officials Ian McCafferty and Andrew Haldane may limit the downside risk and influence the monthly opening range for GBP/USD should the board members show a greater willingness to remove the record-low interest rate.

GBP/USD Daily Chart

GBP/USD Daily Chart
  • Near-term outlook for GBP/USD remains capped by the 1.3700 (38.2% expansion) hurdle, with the downside targets in focus as both price and the Relative Strength Index (RSI) extend the bearish formations from September.
  • A close below the former-resistance zone around 1.3300 (100% expansion) to 1.3320 (38.2% retracement) raises the risk for a move back towards the 1.3210 (50% retracement) region, with the next downside hurdle coming in around 1.3090 (38.2% retracement) to 1.3120 (78.6% retracement).
USOIL

Crude continues to pullback from a fresh 2017-high ($52.83), with oil prices at risk for a larger correction ahead of the Organization of the Petroleum Exporting Countries’ (OPEC) next meeting on November 30 as U.S. producers come back online.

Crude Field Production

OPEC & non-OPEC countries may boost their efforts to further rebalance the energy market as Russia Energy Minister Alexander Novak notes that ‘Russian companies are studying with Aramco the possibility of participating in the Saudi market to provide oil services,’ and went onto say that the $50-$60/bbl range is more appropriate for crude prices. Nevertheless, recent figures from the U.S. Energy Information Administration (EIA) showed field outputs climbing to 9,547 b/d in the week ending September 22, with the figure quickly approaching the record-high (9,610 b/d). In response, Fitch Ratings warns crude prices may stay below $60/bbl in the long-run amid the pickup in U.S. shale accompanied by the decline in global production costs.

USOIL Daily Chart

USOIL Daily Chart

Chart - Created Using Trading View

  • Broader outlook for USOIL has perked up as it breaks out of the long-term bearish formations and clears the May-high ($51.97), but the series of failed attempts to close above the near-term hurdle around $52.00 (50% expansion) to $52.10 (23.6% retracement) brings the downside targets back on the radar especially as the Relative Strength Index (RSI) turns around and fails to push into overbought territory.
  • Break/close below $50.20 (38.2% retracement) may open up the Fibonacci overlap around $48.60 (38.2% retracement) to $49.30 (23.6% retracement), with the next downside hurdle coming in around $47.70 (38.2% expansion).

Retail Sentiment

Retail Sentiment

Track Retail Sentiment with the New Gauge Developed by DailyFX Based on Trader Positioning

  • Retail trader data shows 44.6% of traders are net-long GBP/USD with the ratio of traders short to long at 1.24 to 1. In fact, traders have remained net-short since September 05 when GBP/USD traded near 1.29512; price has moved 2.6% higher since then. The percentage of traders net-long is now its highest since September 03 when GBP/USD traded near 1.29615. The number of traders net-long is 20.0% higher than yesterday and 40.2% higher from last week, while the number of traders net-short is 9.7% lower than yesterday and 25.4% lower from last week.
  • Retail trader data shows 44.5% of traders are net-long with the ratio of traders short to long at 1.25 to 1. In fact, traders have remained net-short since Sep 14 when Oil - US Crude traded near 4861.3; price has moved 3.9% higher since then. The number of traders net-long is 1.3% higher than yesterday and unchanged from last week, while the number of traders net-short is 7.7% lower than yesterday and 3.3% lower from last week.
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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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