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Risk appetite fuels oil market rally Brent extends its rally on Thursday, refreshing nearly three-month highs around $64.80. The prices keep rising for a third day in a row, lifted by positive risk sentiment, OPEC efforts and geopolitics. The next upside target for Brent comes at $65. Investors continue to expect a progress in US-China trade talks that will ultimately could lead to a deal. Trump’s positive comments on this front provide support to riskier assets including oil. In the next two days, traders will assess the statements from Beijing, and evidence of progress could lift the barrel even higher until the end of the week. Another source of bullishness for the crude oil market is the recent statement by Saudi Arabia oil minister, who said the country will cut crude exports and deliver an even deeper cut to its output. Naturally, traders are cheering any signs of a more significant supply cuts than expected, especially as the market continues to worry about outlook for global demand. In the near term, the factors that may fuel profit-taking at attractive levels include lack of progress in trade talks and souring risk sentiment. In a wider picture, the bullish potential in the market will likely further be capped by concerns over global growth.
OANDA:BCOUSD
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Dollar: bulls are still in the game USD index registered fresh yearly highs at 97.20 on Tuesday but failed to sustain the bullish momentum and corrected lower quite aggressively. A mils selling pressure remains today though the bulls are still in the game for now. After the initial spike, European currencies pared intraday gains and switched to a consolidation mode. Traders decided to take profit at attractive levels on the back of rising optimism over trade talks across the markets. Trump said he might consider pushing back a March 1 deadline for trade negotiations with China if both sides are close to making a deal. This message sparked another wave of euphoria across the stock markets and suppressed demand for safe haven currency. In a wider picture, the greenback prospects will depend not only on the general market sentiment but on the incoming US economic data as well. Signs of a relatively steady growth, especially in contrast with signals from Europe, will help the dollar to retain the advantage over its rivals, despite the Fed signaled a pause in hiking rates.
NYSE:SKX
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Oil needs to break out of the range Crude oil prices continue to trade within a limited range for over a month already, being unable to find a clear direction due to conflicting signals. The upside momentum is capped by concerns over trade and global demand, while the selling pressure is limited by OPEC+ efforts and US sanctions on Iran and Venezuela. As such, Brent is now stuck within a $59-$63 range, a break out of which may be around the corner. In the days to come, trader attention will be focused on trade developments between the US and China. Yesterday, the US administration official said Trump still wants to meet China’s Xi Jinping in an effort to end the trade war. So, fresh positive news from this front could fuel Brent demand, along with riskier assets in general. But for the futures to get out of the current channel, the market needs to see a substantial progress towards a deal. OPEC-led supply cuts and US sanctions against Iran and Venezuela could also help. But even in the case of a breakthrough, the expected surge in US shale output, concerns over economy and a stronger dollar will likely keep the bulls in check.
OANDA:BCOUSD
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Gold shows resilience Gold prices finished last week on the offensive, though closed in the red. The metal managed to stay above the $1,300 level during the pullback from highs. The main catalyst behind the bearish correction was strength of the dollar that appreciated nearly across the board. Meanwhile, some overbought conditions added to the selling pressure. However, the uptrend from mid-November remains intact, and the correction from late January could come to a conclusion as soon as dollar demand begins to abate. As the market focus is on the global growth outlook which is worsening, the safe-haven gold demand will likely persist on broader terms. But in the short term, the bullish attempts will likely be limited due to the remaining dollar demand. Technically, the key on the downside is still the $1,300 level as a break below will result in a cloudier outlook. As long as the precious metal holds above the psychological level, there is a scope for a recovery towards $1,320 and higher. This week, investors will focus on the next round of US-China trade talks. Failure to make a significant progress towards a deal will fuel risk aversion and could support the bullion, while the threat of another US government shutdown after a February 15 deadline could hurt the dollar and thus lift the yellow metal more substantially.
TVC:GOLD
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Euro loses its allure The euro failed to receive a respite after a recent sell-off and remains under pressure on Friday. EURUSD has settled around 1.1340, trading with a mild bearish bias. In the weekly charts, the pair is within striking distance from the 200-week MA. This region capped the selling pressure on several occasions over the last few months, so a closure below this moving average will worsen the technical picture significantly. The sentiment around the common currency continues to deteriorate. In its fresh forecasts, the the European Commission revised lower its prospects of economic growth for 2019 in Germany and the region in general to 1.1% from 1.8% and to 1.3% from 1.9%, respectively. Moreover, the Commission now expects inflation at 1.4% versus the previous estimate of 1.8%. Against this backdrop and the latest disappointing macroeconomic data from the euro area, investors push back the ECB rate hike expectations further. If the central bank itself starts signaling a possible shift in its forward guidance, the prospects of shelving plans to hike rates in 2019 will hurt the euro quite dramatically. Technically, EURUSD needs to stay above the 200-week MA that is standing on the way to the 1.290 region, where January 24 lows lie. Should the 1.13 support withstand the pressure from the dollar bulls, the common currency could make some recovery attempts. However, the fundamental picture in the region coupled with trade war worries will prevent the high-yielding currency from a decent rebound in the short term.
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1
Oil pressured by uncertainty After a short-term relief, crude oil prices resumed the downside move on Thursday. Brent holds above the $62 handle but could get back below in the short term as investor sentiment in the market remains skeptical and cautious, at least as long as the barrel is trading under the $63 barrier. According to EIA data, US crude oil inventories climbed by 1.3 million barrels last week. Production remained at the record 11.9 million barrels per day registered late last year. Despite the report was not as bearish as API data and investor estimates, traders found the release more neutral that positive, while fears of resuming output growth persist. Another source of concern in the market is uncertainty ahead of another round of US-China trade talks due in Beijing next week. Investors doubt that the two world’s largest economies will be able to come to a consensus and resolve the key issues to strike a deal before the March deadline. Against this backdrop, Brent will likely remain pressured in the short term, especially amid the persistent dollar demand – the USD index is trading at fresh two-week highs on Thursday. Should the prices hold above the $61 support, the downside potential will remain limited in the short term.
OANDA:BCOUSD
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Pound on the back foot ahead of Super Thursday A combination of disappointing UK data and dollar demand sent the pound lower on Tuesday. After a break below the 100-DMA and the 1.30 handle, GBPUSD accelerated its downside move and remains under pressure today, extending the losing streak to a fifth day in a row. Brexit negotiations deadlock adds to the bearish pressure on the cable. It is reported that the UK PM May will meet Juncker on Thursday. Traders have little hope for a meaningful breakthrough on the key issue – the Irish border. However, any signs of progress could cap the selling pressure on the currency. The major event of week is the Bank of England’s Super Thursday. No changes are expected on a rate hike front, while investors will closely monitor the central bank’s tone on economy and Bexit consequences. But considering a still high level of Brexit-related uncertainty, the monetary authorities will likely prefer a wait-and-see approach. As such, the meeting could bring little clarity on the policy prospects. Anyway, there are downside risks for the sterling from this event as Carney may highlight economic weakness which in turn will further push back rate hike expectations and put the pound under additional pressure.
G
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USD index extends recovery The dollar has finally left behind the recent dovish shift in the Fed’s tone. It looks like that traders have digested an updated message from the central bank and now shift focus to the incoming economic data from the US.  The greenback receives some support from this front. Friday’s US jobs report exceeded expectations strongly, confirming the solid state of the labor market. Meanwhile, the ISM manufacturing index rebounded last month from a decline in December that was temporary.  A spectacular rebound in the 10-year US Treasury yields adds to the upside pressure on the buck. The yields registered multi-day peaks and rises for a third straight day.  As such, the USD index is trading higher for a fifth day in a row and approaching the critical 96.00 figure on Tuesday. A chance of a break above this level will depend on fresh economic data but traders should remain vigilant on new signals from the Federal Reserve and the US economy.
AMEX:USD
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Indecisive EURUSD stuck below 1.15 The common currency is grinding lower on Monday after attempts to break above the 1.15 barrier failed last week. EURUSD has settled around the 100-DMA, unable to decide on a clear direction as a mixed US Nonfarm Payroll report puzzled the markets on Friday. The labor market data didn’t give any significant support for the greenback as traders continue to focus on the Fed’s dovish shift. However, the euro could go lower in the medium term should the economic risks on the euro zone increase. It should be a warning signal that Italy has fallen back into recession in the last quarter as the economy shrunk by 0.2% after a decline by 0.1% earlier. By the way, it is now the third time the troubled economy has fallen into recession in a decade. In the final quarter of 2018, the euro area economy increased by only 0.2%.  As such, further deterioration in the economic data from Italy and Europe in general could put the single currency under pressure as dismal statistics will further push back ECB rate hike expectations and thus will reduce the appeal of the euro despite the dollar lags amid a more ‘patient’ Fed. In the short term, EURUSD could challenge the 1.1425 support if further signs of economic weakness emerge in Europe. As for the 1.15 threshold, a break above is still unlikely at this stage.
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1
Oil market and a wait-and-see February Brent crude futures are trading lower on Friday as concerns over China reemerged after another report showed that factory activity in the country declined the most in nearly three years. Traditionally, weak figures from the second-world’s economy makes traders worry about the prospects for global growth and oil demand. On the other hand, the market is underpinned by an upbeat tone of the latest US-China trade talks as both sides highlighted a progress in their relations and expressed readiness to further move towards a deal. In this context, the key date will be March 1. This is the deadline for striking a deal. Should the countries fail to reach a consensus on the key issues until then, Trump will impose more stringent measures which will eventually lead to further weakness in China’s economy. So the oil market may show a neutral or directionless dynamics in February as many traders will likely prefer to sit on the fence ahead of the crucial date. On the upside, Brent potential is still limited by the $63 level, while the immediate support comes at $60, while a more important level lies at $58.60. As long as the contracts stay within this range, the tone remains neutral.
OANDA:BCOUSD
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Fed’s dovish stance lifts gold Gold is within striking distance of the $1324, trading at fresh eight-month highs on Thursday. The yellow metal is on the rise for a fifth day in a row already. Much of the gains are due to dollar weakness that intensified flowing the FOMC meeting. Powell expressed a more dovish tone and confirmed the central bank’s intention to pause hiking rates. The increasing political and economic risks make the Federal Reserve take a more cautious approach to monetary policy which is positive for the precious metal due to lower US Treasury yields and the dollar.  Probably, a more important message from the Fed was that the monetary authorities could end their efforts to reduce the portfolio sooner than expected. The decision on rates and the balance will depend on the incoming economic data, so both the buck and the bullion are going to be more sensitive to signals from the US economy in the month to come.  Further on, the key focus will be on Friday’s US monthly jobs report. Should the wages and employment numbers come in lower than expected, the selling pressure on the USD could send gold prices to fresh highs. On the other hand, after a spectacular rally, there is a risk of some profit taking ahead of the weekend.
TVC:GOLD
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3
Oil is not ready for a bullish breakout Speculations about further US sanctions on Venezuela propped up oil prices. But the reports failed to give a substantial lift to the markets, the same as the recent sanctions on the country’s energy sector imposed on Monday. Brent is changing hands marginally above the $61 threshold on Wednesday after brief attempt to challenge the intermediate resistance at $61.60. The market lacks the directional impetus and is trading flat in the weekly charts. Oil traders are closely monitoring developments in geopolitics where the US-China trade talks come to the fore. Investors hope to see some progress in trade relations between the two countries despite the scandal surrounding Huawei. This, coupled with Saudi Arabia plan to cut production further helps oil prices to stay afloat. But the current conditions don’t suggest a rally could take place in the market any time soon, unless there is a major breakthrough in trade negotiations, or a steep dollar sell-off after the FOMC meeting. Both scenarios are actually quite unlikel, so the upside potential in Brent will remain limited in the near term, while the bearish risks are still present. From the technical ponit of view, the $59 handle remains an important support area as a break below this level will make the technical picture worse. A daily close above $61 is needed for another run at the $62 barrier.
OANDA:BCOUSD
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Two bearish factors for AUDUSD The Australian dollar suffered steep losses in December amid more evidence of a slowing Chinese economy. In January, the Aussie made recovery attempts and has partly offset the previous decline, However, the downside risks for the pair are still there and the selling pressure may intensify in the days to come. The key reasons behind the indecisive AUDUSD dynamics are the US-China trade relations and ugly signals from the Australian economy. As such, the National Australia Bank’s survey showed that the overall business confidence remained at lowest level since January 2016, while current conditions assessment plunged to 2 from 11 in November, which reflects the slowdown visible in the incoming data from China, Australia’s number one export market. As for the other risk for the Australian currency, Huawei scandal and arrest of CFO could complicate the trade negotiations due on January 30-31. The US Department of Justice has formally requested extradition of Huawei CFO from Canada, while Beijing asked the US to withdraw the arrest order and said the charges were unfair and unethical. These developments could further aggravate relations between the two countries and spoil the atmosphere right before the new round of trade negotiations. Technically, failed attempts to regain the 0.72 figure in the short term could lead to a stronger downside pressure should the risk aversion resume. The immediate significant support comes at 0.7080. As long as the pair is holding above this region, the selling pressure is limited.
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Gold is yet to confirm a bullish breakthrough The deal to reopen the US government failed to lift USD sentiment as traders are shifting their focus to the upcoming Fed meeting. The bearish expectations are feeding into a broad-based dollar selloff, which in turn fuels an aggressive rally in the precious metal. On Monday, the bullion registered fresh six-month highs above the key psychologically important level of $1.300 which now stands as the immediate support. Investors expect that the Federal Reserve will signal a pause in its tightening cycle on Wednesday, citing economic and probably political risks. A more cautious tone is priced in already but could increase the selling pressure on the greenback, depending on the tone of the Fed’s official statement. In this scenario, gold may proceed with the rally despite the oversold conditions in the short-term charts. As for the current picture, the USD bearish pressure has abated now, in part due to a cautious optimism ahead of a new round of trade talks between the US and China this week. Another event that will affect the dollar direction in the days to come is the US NFP employment report due on Friday. Weaker than expected figures could add to the upside pressure in gold prices, but the bullion is yet to confirm a bullish breakthrough and avoid a wave of profit-taking after a strong rally.
TVC:GOLD
by arumcapital
GBPUSD is a perfect ‘buy on dips’ candidate The pound was rejected from early-November highs above 1.31 reached earlier in the day but remains elevated, preserving the bullish bias in the daily and weekly charts on Friday. The UK currency is supported by the receding risks of a no-deal Brexit as well as the potential DUP backing of May’s Plan B. The party hinted it could say ‘yes’ if the plan includes a clear time-limit to the Irish backstop. Despite the heightened uncertainty around the passing of the PM’s updated plan, which in fact doesn’t differ much from the Plan A, the incoming headlines are enough to feed into further rally in the pound. In current conditions, GBP remains a good ‘buy on dips’ trade, which means the potential corrections will be limited and fresh highs are yet to come, unless the important ‘bearish’ news come from the Brexit front. The key is the fact that all the extreme scenarios for Brexit are ruled out now, and the Parliament members could become more flexible as the official exit date is getting closer. As such, the pair that now stalled around the 20-DMA below 1.31 will likely further attract the bulls and could challenge the November highs at 1.3175 in the days to come. By the way, weaker dollar amid the ongoing US government shutdown could ease the way higher for GBPUSD.
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Oil market monitors US-Venezuela relations Oil prices struggle to resume the upside momentum on Thursday against the backdrop of stronger dollar demand, global growth slowdown worries, and the unexpected build up in US crude stockpiles. Brent lost nearly 1% yesterday and makes shallow recovery attempts around the $61 figure on Thursday. There is a factor that caps the downside impetus in the oil markets however. The US-Venezuela diplomatic relations have worsened, which raises the probability that Washington will tighten the sanctions on the Venezuelan energy sector. This in turn could lead to some shortage of crude for a number of US refiners. In the longer term however, tighter restrictions could give the country’s energy sector a chance for a recover from the regime of Maduro. As such, oil traders are focused on the developments on this front and should Trump deliver tighter sanctions, crude oil prices could jump amid supply concerns. But in the longer run, investor sentiment will further depend on dynamics in risk trades, US shale output activity, and the efficiency of OPEC+ deal. Technically, Brent needs to stay above the $60 support in order not to lose the momentum and avoid a more aggressive profit-taking. A daily close above the $61 hurdle will re-open the way to a major resistance around $63, where the 2019 high lies.
OANDA:BCOUSD
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1
USDCHF could struggle to break parity USDCHF consolidates its recent gains to near six-week tops as the pair continues its upside move from the lows around 0.97 registered on January 10. The price is changing hands within striking distance from the 1.00 round figure which is a ‘hit or miss’ moment for the pair. Despite the investor sentiment remains subdued and risk aversion prevails, CHF fails to attract buying interest as a safe-haven currency as traders prefer the Japanese yen and gold to shield from global risks. As such, the greenback proceeds with its corrective rebound, appreciating for a seventh day in a row on Wednesday and remains in a solid short-term uptrend. At this point, it is interesting to see if the bulls are able to bring the pair above the parity level. The risk is that traders could shift to some profit-taking around the important psychological level, citing a generally muted dollar demand in the currency markets. The negative consequences from the still ongoing US government shutdown may undermine the USD’s ability to make a major bullish breakthrough. As such, the probability of a corrective retreat from the current levels is rather high.
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Euro: downside risks prevail EUR/USD turned negative on Tuesday following timid recovery attempts at the start of the trading week. The euro is pressured by a sell-off in risky assets amid the signs of rising tensions between the US and China as well as ahead of the World Economic Forum in Davos, where the attendees could express concerns over the global growth. The dollar demand picked up against the risk-off tone in the global markets as the US said it was planning to request the extradition of the Huawei CFO from Canada. Apart from that, the European Commission has lowered Italy's growth forecasts quite dramatically, while the upcoming ECB meeting only adds fuel to the fire as investors expect that Draghi will highlight economic risks in the region and will push back market expectations of the first rate hike in eight years. Against this backdrop, the pair has a potential for further decliner particularly as the RSI is not yet showing oversold conditions. Today, the price has derailed the intermediate support at 1.1350 for the first time since January 4, which makes the 1.13 threshold vulnerable. Considering the signs of slowing Eurozone growth, there are downside risks for the common currency in the longer term as well.
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Kiwi may fall further NZDUSD has been depreciating for a sixth day in a row - the longest losing streak in over three months. The currency pair is trading barely above the 0.67 figure on Monday and it looks as if the longer-term down trend has resumed. The US dollar feels relatively comfortable at the current levels. The key risks for the greenback are the prolonged US government shutdown and amore ‘dovish’ stance by the Federal Reserve. On the other hand, traders so far shrug off the potential consequences from the political crisis in the country, while much of the expected pause in hiking rates is priced in already. Therefore, the downside potential for the greenback looks limited at the moment. Meanwhile, the NZD could fall further amid fresh signs of slowing growth in China and lack of progress in trade talks on the intellectual property issues. As such, should the risk aversion resume, the pair could lose the 0.67 level for the first time since early January. In this case, another bearish breakthrough will be a confirmation that the bearish trend has resumed. To prevent this scenario, NZDUSD needs to catch a bid around 0.6720 and get back above the 0.6760 area but the downside risks prevail in the short term.
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1
Oil market cheers US-China trade headlines After a brief pause on Thursday, oil prices resumed the ascent and rose 1% today. The bulls are cheering the easing fears about prolonged oversupply after the POEC report showed the cartel production fell sharply in December. This fact suggests that producers could take strong efforts within a new deal amid the prospects for lower oil demand against the backdrop of slowing economy. The speculations about the possible lifting some tariffs imposed on Chinese buoyed financial markets and gave a lift to oil prices as well. Despite the rumors were denied, investors continue to raise hopes for resolving the trade issues between the two countries that proceed to another phase of negotiations in late January. Global investor sentiment continues to set the tone for Brent that has become more sensitive to risk trends recently. Brent poised for weekly gains of more than 2% after two weeks of strong recovery. Technically, the prices need to overcome the $62.50 resistance to target the $65 handle. But at the moment, there bulls have no enough incentive to push the contracts aggressively higher. Moreover, further attempts to break above $62 could attract a partial profit-taking in the near term.
OANDA:BCOUSD
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1
EURGBP: bullish correction possible The cross is driven mostly by Brexit headlines these days. The pound looks quite steady despite the controversial signals from the UK. The UK currency advances this month on hopes that the deadline for London to leave the EU will be extended. There are also talks about a second referendum, which gives a lift to sterling as well. But the uncertainty on this front remains elevated. Next Monday, May will present her Plan B to the House of Commons, and there is a high risk that the new plan will be rejected. By the way, the leader of the main opposition Labour party, Jeremy Corbyn, confirmed he will boycott talks until the prime-minister rules out the option of a no-deal Brexit. EURGBP reached the end-November low at 0.8829 on Thursday and was then rejected from this level. Considering the oversold conditions in the short-term charts and the continuing Brexit turmoil, sterling could come under pressure in the days to come and thus send the cross higher from the current level. In this scenario, the pair may regain the 0.8880 handle and target the 0.8950 region in the medium term.
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AUDUSD stuck around 0.72, lacks the impetus Aussie failed to make a clear break above the 0.72 figure last week and since then can’t decide on the direction, struggling to resume the upside move. The bullish outlook turned neutral after rejection from the key resistance level, with upside risks have ebbed lately and now the pair lacks the directional impetus. The tone for the pair is set by economic data from China and signals from monetary policy. The trade data from China this week showed a steep decline in exports and imports, which hurts the AUD amid signs of weakening economy. Against this backdrop, the Chinese officials announced new measures to boost economic growth but this step failed to give a lift to the pair as the dollar demand surged. Aussie remains sensitive to alarming economic signals, which makes the Australian currency vulnerable to losses in a wider picture. In the short-term, the pair needs a more sustainable confirmation of the bullish tone in the oil market. After two days of profit-taking, Brent resumed the upside move and clings to the $61 handle. A break above this barrier could encourage AUD bulls should the global investor sentiment remains neutral-to-bullish in the near term.
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Oil market: too early to call a victory Brent crude reached fresh one-month high around $62.50 late last week but failed to preserve the momentum and attracted profit-taking that took prices below the key $60 handle. At the start of a new trading week, the barrel was hit by dismal Chinese trade data that reignited concerns over the slowing global growth and pushed commodities lower. Now, when global investors shrugged off another portion of bearish news, crude oil prices are trying to regain the upside bias but the traders prefer to trade cautiously so far. Oil market is getting more and more sensitive to global sentiment in the stock markets and demand concerns continue to cap the recovery potential in Brent. Meanwhile, OPEC countries are trying to support the prices by positive comments. Today, Saudi Arabian Energy Minister Al-Falih said that it will take time for the production cuts to be reflected in the market but at the same time he highlighted that the OPEC+ 1.2 million bpd cuts will have a 'strong impact' on the market. A day earlier, the minister noted that the global economy is strong and there is no cause for worry. However, it seems that such verbal interventions are not enough to fuel a sustainable rally in prices as there are still concerns over the global growth and rising activity in the US shale fields. Traders need to see evidence of the OPEC+ deal efficiency to start buying in a more robust manner. So, while the general sentiment in the market has improved in January, the doenside risks are still there.
OANDA:BCOUSD
by arumcapital