WTI/USD – US Crude Slides as Crude Inventories Jump

US crude has reversed directions on Wednesday and has posted sharp losses. In the North American session, WTI/USD futures are trading at $46.75 per barrel. Brent crude futures are trading at $48.88, as the Brent crude premium has widened to $2.13. In economic news, Crude Oil Inventories surprised the markets with a strong gain of 2.5 million barrels. The markets had expected a small decline, and the strong reading has sent US crude prices sharply lower. Also, US Existing Home Sales dropped sharply, posting a reading of 5.39 million. On Thursday, the US releases two key events – Core Durable Goods report and Unemployment Claims. As well, the much-anticipated Jackson Hole meeting begins on Thursday.

US housing numbers are pointing in all directions this week. Existing Home Sales in July disappointed with a weak reading of 5.39 million, down 3.2% from a month earlier. This was much lower than the estimate of 5.52 million and marked a 4-month low. Year-over-year, the indicator decreased for the first time since November 2015. It was a completely different story on Tuesday, as New Home Sales jumped to 654 thousand, marking a 12.4 percent increase. This was the highest number of new home sales since 2008.

The Jackson Hole economic conference, which begins on Thursday, will bring together the heads of central banks and other senior financial officials. Investors are sticking to the safety of the sidelines, unwilling to make any major moves. The markets will be looking for hints from Federal Reserve chair Janet Yellen regarding the Fed’s monetary plans, particularly the timing of a rate hike. FOMC members are expected to express their views in the days leading to the crucial meeting. Fed Vice Chairman Stanley Fischer took the opportunity and sounded upbeat about the US economy, saying that the Fed was close to its aims of a full labor market and the inflation target of 2 percent. The latter claim sounds a bit optimistic, as US inflation levels have consistently been closer to zero than the 2 percent level. Janet Yellen will likely address the inflation issue at Jackson Hole, as inflation levels will be a crucial factor in whether the Fed pulls the rate trigger before 2017. The odds of a September hike are only about 12%, while the likelihood of a December move is around 40%.

WTI/USD Fundamentals

Wednesday (August 24)

• 9:00 US HPI. Estimate 0.3%. Actual 0.2%
• 10:00 US Existing Home Sales. Estimate 5.52M. Actual 5.39M
• 10:30 US Crude Oil Inventories. Estimate -0.5M. Actual +2.5M

Thursday (August 25)

• 8:30 US Unemployment Claims. Estimate 265K
• 8:30 US Core Durable Goods Orders. Estimate 0.4%
• All Day – Jackson Hole Symposium

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, August 24, 2016

WTI/USD August 24 at 10:35 EDT

Open: 47.64 High: 47.73 Low: 46.71 Close: 46.76

WTI USD Technical

• WTI/USD showed limited movement in the Asian and European sessions. The pair has posted sharp losses in North American trade
• 46.69 is under strong pressure as support. It could break in the North American session
• There is resistance at 50.13

Further levels in both directions:

• Below: 46.69, 43.45 and 39.32
• Above: 50.13, 53.50 and 56.50

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.