Eurozone inflation and US private payrolls to influence trade

Oil steadies after a 5% drop

Oil prices tumbled 5.5% yesterday after reports on Iranian TV that the US and Iran had agreed to revive the Iranian nuclear deal.

If true, this could mean that sanctions on Iranian oil could soon be lifted, which would see oil supply rise. Iran has considerable volumes of oil in storage which it could release, although this is unlikely to happen immediately. Iran could then return oil to the market at the rate of 1.3 million barrels per day. The higher supply could keep oil prices lower.

However, should Saudi Arabia cut output, as it talked about earlier in the month, then oil prices could quickly give back the losses from increased supply. Today oil prices are recovering slightly after a larger than forecast rise in inventories. EIA stockpile data is due later.

Where next for oil?

After failing to rise above the 50 sma, the oil price rebounded lower to 90.50 the 20 sma.

The price currently trades caught between the 50 & 100 sma. The bearish crossover on the MACD favours the downside. If bulls fail to defend the 20 sma, sellers could look to target 88.50, the July 14 low, ahead of 85.00, the August low. A break below here creates a lower low.

On the flip side, should bears fail to defend the 50 sma at 97.23, buyers could bring 100.00 the psychological level back into focus ahead of 103.60, the July 8 high.

HPE misses revenue but beats earnings forecasts

Hewlett Packard Enterprise (HPE) released Q3 results after the bell yesterday, with earnings and revenue increasing yearly.

Net income rose to $409 million, up from $392 million last year. Adjusted earnings for the quarter were $0.48, in line with analysts’ consensus. Meanwhile, Q3 revenue came in at $6.95 billion, up from $6.90 billion last year but slightly below forecasts of $6.97 billion.  Revenue missed estimates due to a weaker PC market as personal systems sales were down 3% from the same quarter a year earlier. The share price trades 2.5% lower pre-market.

EUR/USD rises ahead of inflation data

EUR/USD closed above parity for the first time in over a week yesterday.

The euro rose after German inflation hit a 40-year high, lifted by increasing energy and food prices. After a weekend of hawkish ECB commentary, the hot inflation data fuelled expectations that the ECB will hike rates by 75 basis points next week. The USD ended flat, paring earlier losses after consumer confidence data unexpectedly jumped, prompting speculation that the Fed will keep hiking rates aggressively to rein in spending and inflation.

Today the focus now turns to eurozone inflation which is expected to rise to a record high. Hot inflation could cement expectations of a jumbo-sized rate hike from the ECB. Later in the session, US ADP private payrolls are expected to post a solid 200k gain.

Support can be found at 0.99 (2022 low) and 0.9850 (round number).

Resistance for the pair can be seen at 1.0093 (20 sma) and 1.0315 (50 sma).