Market Analysis

WTI Faces Challenges Despite OPEC+ Production Cut Extension

Dupoin · 04 Jun107.2K Views

XAUUSD

Prediction: Decrease

Fundamental Analysis:

Gold saw an increase of over 0.80% as US Treasury bond yields declined, following mixed economic data from the United States. This has fueled speculation that the US Federal Reserve might ease its monetary policy. Along with a risk-averse market sentiment, these factors contributed to gold's rise from a daily low of $2,314 to $2,345.

In the previous week, the US Core Personal Consumption Expenditure Price Index (PCE), the Fed's preferred measure of inflation, stabilized, bolstering hopes for potential rate cuts. However, business activity reports from S&P Global and the Institute for Supply Management (ISM) showed mixed results for May, with the ISM reporting contraction for the second straight month.

Technical Analysis:

The upward trend in gold prices remains intact after rebounding from the 50-day Simple Moving Average (SMA) at $2,331. The momentum has shifted towards the buyers, with the Relative Strength Index (RSI) staying above the 50 midline, suggesting potential for further gains. If XAU/USD buyers can push the price above $2,400, it could lead to targets of the year-to-date high of $2,450 and eventually $2,500. On the downside, a drop below the 50-day SMA at $2,331 might set the stage for testing the May 8 low of $2,303, and possibly the May 3 cycle low of $2,277.

USDJPY

Prediction: Increase

Fundamental Analysis:

The latest inflation report from Tokyo, a key indicator for national inflation trends, indicates rising price pressures in May. The core Consumer Price Index (CPI), excluding fresh food, has risen to 1.9% year-on-year, up from 1.6% in April, aligning with forecasts. Meanwhile, the headline CPI, which includes all items, increased from 1.8%, marking a two-year-plus low, to 2.2% year-on-year.

This increase in inflation is a positive sign for the Bank of Japan, although it is unlikely to lead to a tightening of monetary policy in the near term. The Bank of Japan continues to closely monitor price dynamics in its efforts to achieve a sustainable and stable 2% inflation target.

Technical Analysis:

Retail trader data indicates that 25.18% of traders are net-long, with a short-to-long trader ratio of 2.97 to 1. The number of traders net-long has decreased by 3.42% from yesterday and 11.68% from last week. Conversely, the number of traders net-short has declined by 4.31% since yesterday and 1.38% from last week.

WTI

WTI Prediction: Increase

Fundamental Analysis:

The Organization of Petroleum Exporting Countries and its allies, known as OPEC+, decided to extend their current production cuts during their meeting on Sunday. This decision is set against a backdrop of rising inventories, increasing US oil production, and sluggish demand growth from China, the world's largest oil importer.

Technical Analysis:

Oil prices have declined in recent days, with the higher prices previously capped at $85 before trending down towards the significant $80 level. The recent drop also easily broke through the $82 level, but today's price action appears to have found support just above the $80 mark.

Upside potential seems to be limited to the $84/$85 range, with the 200-day simple moving average (SMA) preventing higher prices. The medium-term trend indicates further downside, but there is a possibility of a near-term pullback, which should be monitored at the start of the week. The descending trendline will offer the first test of a potential counter-trend move.

HSI

HSI Prediction: Increase

Fundamental Analysis:

Hong Kong's stock market has experienced a robust rally, buoyed by China's recent stimulus package which has positively influenced investor sentiment. Global investors are rebalancing their portfolios to capitalize on the undervalued local shares. The Hang Seng Index (HSI) has enjoyed a four-month winning streak, its longest since a five-month run ending in February 2021. According to Selina Cheung, co-head of Asia equity capital markets at UBS, recent investor interactions have elicited "very positive feedback." Long-term overseas funds, hedge funds, and some sovereign wealth funds are increasingly showing interest in upcoming IPO deals.

Technical Analysis:

The Hang Seng Index appears to have found its bottom and is poised for a rebound, especially as the price approaches the 200-day Moving Average (MA). An entry point at 17,900 is recommended, with a profit target at 19,800 and potential for further gains towards the all-time high (ATH).

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