Oil, GBP/USD Forecast: Two trades to watch 909

Oil rises to a three-month high as U.S.-Iran hostilities escalate

Oil prices have extended gains for a ninth straight session, up 10% so far in September as hostilities in the Middle East escalate, raising concerns over further disruption to global oil supplies.

Brent trades at $100 a barrel, whilst WTI is approaching $95. Given developments in the region, it only seems a matter of time before these key levels are broken.

The latest move higher comes as U.S. forces struck five Iranian tankers on Tuesday in response to Iran attempting to strike a U.S. Navy warship. Tehran responded by launching missiles at a U.S. base in Jordan and said it attacked two U.S. vessels and eight oil tankers in the Strait of Hormuz.

The tit-for-tat strikes between the two countries have escalated over the past week, heightening worries about supply disruptions and lifting the risk premium on oil.

Hopes of a permanent resolution to the six-year-old war have faded as fighting has ramped up again.

Recent developments have reinforced the view that the two sides are still a considerable distance from restarting peace talks and, as a result, the market is likely to continue pricing in an elevated risk premium.

Disruptions across the Strait remain acute. Only six commodity vessels crossed the Strait on Tuesday, down from nine the day before and half the recent average over the last 10 days, according to Kpler.

The broader physical market is currently tighter. Shipments of Middle Eastern crude are about 11 million barrels a day, down from about 18 million barrels a day before the conflict.

Meanwhile, a rebound in Chinese oil buying is lifting prices for African, Canadian and Latin American crude as disruptions in the trade flows push refiners to seek alternative supplies from more distant markets.

WTI oil technical analysis

Oil has broken out of its symmetrical triangle pattern, rising to almost $95, a level last seen in June. Buyers, supported by momentum, will look to push above $95, which is the 38.2% Fibonacci retracement of the $55 low and $120 high. A move above here brings $100 into focus, ahead of $105, the 23.6% Fib level.

On the downside, support can be seen at $88. A break below here exposes the 50 EMA at $85, ahead of $80, the 200 EMA and the 61.8% Fib retracement. Below here, sellers could gain traction towards $75, the August low.

GBP/USD struggles at 1.3350 as BoE's Bailey pushes back on rate hike expectations

GBP/USD is struggling to push above 1.3500 following comments from Bank of England Governor Andrew Bailey, who warned that interest rate hikes aren't inevitable.

Speaking in front of the Treasury Select Committee on Tuesday, Andrew Bailey noted that rate hikes continue to depend on economic and geopolitical developments rather than being just a matter of time.

Currently, the market is pricing in a 25-basis-point rate hike before the end of the year and two more for 2027.

His comments come as oil prices reach $100 a barrel, adding to inflationary concerns. Concerns are also rising over food inflation, which, owing to shocks from El Niño, summer droughts and the war in Iran, could rise above 6% next year.

The Food and Drink Federation warned that food inflation could hit almost 4% by Christmas, more than double the current rate, which would mark the highest annual increase since early 2024.

On Monday, UK Chancellor Healey stressed his commitment to curbing rising costs for businesses and the public.

Meanwhile, the U.S. dollar is struggling, falling for a third straight session despite Friday's stronger-than-expected nonfarm payroll report, as investors look cautiously ahead to this week's inflation data, which could provide further clues on the Fed's outlook ahead of next week's meeting.

The market is currently pricing in a 60% chance of a 25-basis-point rate hike. Slightly cooler-than-forecast inflation data could pull the U.S. dollar sharply lower.

GBP/USD forecast – technical analysis

 

GBP/USD trades within an ascending channel dating back to late June and above the 50, 100 and 200 EMAs, maintaining a constructive outlook. The price ran into resistance at 1.3675 and eased back to support around 1.3480 at the 50 EMA. From here, the price has recovered but is struggling to push past 1.3550 in a meaningful manner.

Buyers will need to rise above 1.3550 to extend gains towards 1.3600, the late-August high.

On the downside, support can be seen at 1.3490. A break below here turns attention to the multi-month falling trend line support and the 200 EMA at 1.3425. Breaking below here could see sellers gain traction towards 1.3340.