GBP swoons on political turmoil; Oil gains despite inventory build

Summary:

• Pound plunges as Raab resigns

• Rand moves lower on land seizure concerns

• Oil gains despite 8 consecutive inventory rise; recovery remains fragile

• US retail sales beat forecasts; Gold well placed to rally?

• Bitcoin heads for lowest close of 2018

There’s been a sharp move lower in the pound today after Brexit minister Dominic Raab  announced his resignation. Sterling fell by almost 1% in a matter of minutes on the news and the announcement is reminiscent of the chequers deal in the summer where initial support from the cabinet has proved short lived for Theresa May. The announcement is a major blow for May and others will likely follow suit in offering their resignations with her position now growing increasingly tenuous.

The South African rand declined on headlines that local lawmakers backed an implementation of changes to the country’s constitution to allow land seizures without compensation. Let us recall that this has been the most contentious topic regarding the South African economy in recent months and many economist have already criticized such a proposal suggesting that it might lead to an array of bankruptcies. The daily chart of the USDZAR paints quite a rosy backdrop for the rand. The pair failed to move above the bearish trendline and as a result it reversed. It looks that sellers might attempt to head toward 13.80 - the pivotal technical level.

The latest inventory data from the US has shown yet another increase, with this release rising for a remarkable 8 weeks in a row. Not only did the report extend this sequence of rises, the scale of the latest increase is also noteworthy with a gain of 10.3M. This is well above the +2.9M expected and also the prior of 5.8M and is in fact the highest rise of the whole recent sequence - you have to go back over 18 months to February 2017 to find a higher reading. Oil.WTI still remains under pressure even after today’s gains with the 23.6% fib of the larger declines some way overhead at 59.99. Recent lows around 54.76 coincide with previous swing levels and could now be seen as important support.

There have been several data points released from the US ahead of the Wall Street open with the biggest positive coming from upbeat consumer spending figures. Retail sales for October came in at +0.8% M/M compared to +0.5% expected, a strong rise on the -0.1% seen last time out - although this was revised lower from +0.1%. The core reading was similarly strong, coming in at +0.7% against a median estimate of +0.5%, with the prior also being -0.1%. Gold in particular is worth keeping an eye on as the market is close to confirming a break above the Ichimoku cloud on D1.

Will it stay or will it go? That’s a question investors were asking for weeks in reference to the key $6000 level for the Bitcoin price. It was amazing that despite no positive momentum the price was able to hold the level nearly like a temple. But each temple may eventually fall if a besiege is strong and consistent enough and that’s the case for Bitcoin this week. A trigger came from Bitcoin’s smaller brother – BitcoinCash (now available for CFD trading on xStation5 as well) that will face a hard-fork tomorrow. Taking a look at a weekly Bitcoin chart there are few reasons for optimism. Unless we see a last-minute recovery, Bitcoin will close at the lowest level since early October 2017. A major break after a long consolidation usually heralds a big longer term move. The first support can be spotted at around $4900 but then it’s $3000 so a potential is really major.