WTI crude oil is stuck in the doldrums around $100/bbl while the Rand flexed its muscles the past week. US Q4 GDP figures disappointed and this can have a significant impact on crude oil prices.
WTI crude oil declined by just under 1% over the past week. The market is stuck in neutral, waiting for decisive news out of Europe, as well as further news around the Iran situation. 4th Quarter GDP figures out of the USA came in at 2.8%, 0.2% less than economists had expected. This could be a double edged sword, but we will discuss that in more detail later in the report.
Technically the market is stuck in neutral, with no apparent trend. This sideways movement can continue for another two weeks. The bearish “head & shoulders” pattern remains in play and should the neckline be broken ($97), prices should decline quickly to $94 and even lower. If the neckline holds for another week or two, the formation would have failed and technically this will be bullish. We believe that $97 will be tested, but expect a bounce from there back to $100 and potentially up to $103.
We expect a range of $97-103 for the rest of the week.
The Euro bounced from multi-month lows against the US$ and the Rand followed enthusiastically. The Rand gained 2% over the past week. The lack of disastrous news out of Europe provided support to the Rand and Friday’s miss on the GDP figure placed the US$ under pressure.
The Rand is still above the crucial level of R7.68/$, that seems to be the bottom of the current range. A break of the level should see the Rand move down to R7.50 and possibly R7.36. To the upside R8 is turning into resistance and we do not foresee a breach of this level in the coming week.
We expect a range of R7.68-7.95/US$ for the rest of the week.
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