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Oil Prices Grow After Saudis Agree To New, Deeper Cuts

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  • Oil gained yesterday, after the OPEC and non-OPEC ministerial meeting. Results were positive for oil prices: Nigeria volunteered to cap its production to 1.8 mbpd and, most importantly, Saudi Arabia (the biggest exporter), decided to extend its export cuts to 6.6 mbpd, almost 1 mbpd less than a year ago.
  • WTI broke the resistance level of 46.25 (S1) yesterday, and now it is heading for a test near 46.85 (R1), indicating a somewhat positive short-term outlook.
  • However, we doubt that this could turn into a strong, long-term positive trend in oil prices. If the prices keep growing, more US shale producers could decide to re-enter the market, thus raising the global production and capping prices again.

AUD stable ahead of CPI data and Lowe’ speech

  • Tomorrow, during the Asian day, Australian CPI data for Q2 is scheduled to be released. RBA Governor Lowe will speak a few hours later. Forecasts for CPI data are for an acceleration and thus, AUD could extend its recent gains.
  • AUD/USD consolidated yesterday, trading between 0.7900 (S1) and 0.8000 (R1). We think that the outlook remains positive: with strong data, we could see a new challenge of the R1 level, and, in case of a clear break, the pair might head for our next resistance level at 0.8070 (R2).
  • However, we think caution is required before Lowe’s speech: he could express concern regarding recent Australian yields and AUD gains, as Deputy Governor Debelle did last week, causing Aussie to pull back.

Today’s highlights:

  • Germany: Ifo survey for July (08:00 GMT), expectations are for a decline.
  • US: CB consumer confidence and Richmond Fed business activity indices, both for July (14:00 GMT).

WTI

WTI Chart

  • Support: 46.25 (S1), 45.55 (S2), 45.00 (S3)
  • Resistance: 46.85 (R1), 47.55 (R2), 48.50 (R3)

AUD/USD

AUDUSD Chart

  • Support: 0.7900 (S1), 0.7840 (S2), 0.7800 (S3)
  • Resistance: 0.8000 (R1), 0.8070 (R2), 0.8160 (R3)

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