US light crude has been sold off aggressively this morning and the techincal set-up can be put into good perspective if you look on the two-hour chart.
The American Petroleum Institute detailed a 14.3 million increase in stockpiles, again adding to the supply/demand imbalance. With US light crude under selling pressure, the falls triggered stops through the 17 February low of $51.00. The bears will be eyeing a move to the 11 February low of $48.09 and it seems short positions are preferred from a risk/reward perspective. There is clear resistance around $54.00 (as seen on the charts), marking a triple top and, unless US light crude can break this point, a neutral or bearish bias is warranted.
Looking at the hourly chart, it seems the upside in EUR/USD is limited to $1.1450, but if we get to $1.1500 you can see good supply has come into the market since early February. The $1.1500 level remains that line in the sand and I would expect money managers to fade upside moves to here in the short term.
With the Greek issues now firmly in the spotlight, the likelihood is we should see some sort of temporary compromise. However, my back of the envelope calculation shows there is a 25% chance the Eurogroup reject Greece’s loan extension proposal as being too vague. If that happens, a move below $1.1300 can’t be ruled out in the short term.
The pair continues to make lower lows, although there was good buying pressure coming into the pair yesterday from £0.7350. My bias is for the pair is to trade lower from here, but I would use rallies to £0.7420 to initiate shorts.
As detailed in the EUR/GBP piece, the market now focuses on today’s Eurogroup meeting in which the group will decide on whether to accept the request for a loan extension. A failure to come up with agreement should see EUR/GBP sold off aggressively. We are entering the eye of the storm with regards to the Greek negotiations.