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Another busy week for investors Late last week, investor sentiment has improved somehow due to generally positive US jobs data which curbed concerns over a potential recession in the world’s largest economy after dismal manufacturing and services PMIs. This week is going to be busy as well, with a new round of US-China trade talks will be in focus. The reports that Chinese officials have narrowed the scope of issues they will discuss at the upcoming trade talks makes investors worried about a chance for a broad agreement between the two countries. As such, market participants will likely be cautious in the days to come, and some negative reaction from Trump may follow. Apart from trade talks, investors will pay attention to the ECB and FOMC meeting minutes this week. The Federal Reserve will shed the light on its decision to cut rates in September and probably will indicate how the October meeting may play out. Should the central bank hint at another rate cut this month, the greenback will get a hit across the board. However, the general market sentiment will still depend on the trade talks, with lack of progress will hurt risky assets.
FWB:FOMC
by HelenRush
All eyes on NFP and Powell After a series of dismal economic data from the US this week, the dollar continues to lose ground against major counterparts. EURUSD saw a short-term rally on Thursday, with the 1.10 handle served as a local resistance. Today, the common currency preserves a bullish bias amid a broadly weaker greenback. Now, market focus shifts to the upcoming US NFP jobs data which could paint a clearer picture of the US economy amid the increasing signs of a recession. Should employment growth come in lower that 145-150K, traders will be disappointed once again, with wages data will also be important. Bleak data will increase the odds of a rate cut by the Federal Reserve in October. In this scenario, risk aversion will reemerge and the greenback will extend the decline. EURUSD thus could get back above the 1.10 handle and target the immediate local resistance around 1.1025. Also, the Fed’s Powell will deliver a speech later in the day and his tone could affect the dollar as well. A potentially dovish rhetoric will increase the selling pressure on the USD.
by HelenRush
Oil could fall further on growth risks Crude oil prices declined aggressively on Wednesday, with Brent has registered fresh nearly one-month lows around $57.20. Today, the prices are making some recovery attempts but struggle to get back above the $58 handle and remain under pressure in general. The market took a hit from a series of dismal economic data from the US, which spurred concerns over the outlook for global oil demand amid the rising risk of a recession. In this context, the US service PMI due later today will be in the spotlight, with another disappointing figure could prompt another sell-off in risky assets including oil. Meanwhile, the EIA report showed that US crude oil stockpiles increased by 3.1 million barrels last week, which added to the negative sentiment in the market after the API report pointed to a decline in inventories by nearly 6 million barrels. Technically, Brent needs to get back above the $60 handle in order to stage a more robust recovery. However, at this stage, the downside risks prevail, with the prices could challenge the $57 level in the short term. Once below this handle, Brent could target the lows just below $56.
TVC:UKOIL
by HelenRush
1
EURUSD has a chance to recover After EURUSD made fresh two-year lows at 1.0878 amid a stronger dollar and dismal Eurozone data. The manufacturing PMI came in at 45.7 beating forecasts of 45.6 in September, registering the lowest level since October 2012. Later in the day, the pair reversed and closed around 1.0930 as the greenback turned lower across the board. The US manufacturing PMI ISM came in at 47.8% in September, the lowest since June 2009. It was the second consecutive month of contraction and reinforced worries about a recession amid the ongoing trade war with China, which starts to hurt the US economy itself. Meanwhile, Trump blamed high interest rates and a strong dollar for the weakness in manufacturing, which added to the negative pressure on the dollar. Now, as the country’s economy shows further signs of weakening, the upcoming employment data due on Friday will be of high importance for the US currency as disappointing jobs and wages figures could further increase the odds of another rate cut by the Federal Reserve in October. As such, EURUSD has a chance to recover by the end of the week as the greenback may suffer further losses. On the other hand, as the common currency remains generally week, it may need additional catalysts to stage a sustainable recovery.
by HelenRush
Brent flirts with $60 Oil prices are making shallow recovery attempts on Tuesday after yesterday’s plunge by over 2%. Brent crude so far struggles to get back above the key $60 level but could gradually regain the upside momentum and stage a more pronounced ascent from recent lows in the short term. Traders continue to digest the news that Saudi Aramco has restored full oil production and capacity to the levels they were at before attacks on its facilities in mid-September. This factor caps the upside momentum as market participants expected it would take longer to restore production in the country. On the other hand, the market derived support from reports that production at the world’s largest oil producers declined in the third quarter and in September. According to a private survey, OPEC oil output has fallen to an eight-year low in September after attacks on Saudi oil plants cut production. At this stage, the survey could serve as a short-term bullish factor but rising dollar and a cautious tone in the global financial markets will likely cap the upside potential. Now, Brent needs to overcome the $60 handle and target the $61.30 area.
TVC:UKOIL
by HelenRush
Yen demand reemerges amid trade developments Risk sentiment looks subdued on Monday, with investors prefer a cautious approach due to the lingering uncertainty around the upcoming US-China trade talks and ahead of fresh economic data, including the key US NFP employment report. Against this backdrop, USDJPY turned lower after three days of gains. The pair struggled to make a clear break above the 108.00 handle and shifted to the 100-DMA around 107.80. Traders continue to closely monitor developments on the trade front, with risk sentiment has deteriorated amid last Friday’s reports that the Trump administration was considering curbs in investments into China including delisting Chinese companies from US stock exchanges. Such a step would be a significant escalation in the trade tensions between the two countries. As such, the yen demand may persist in the near term. Moreover, the selling pressure in the risky assets segment could increase should fresh economic data disappoint and confirm the threat of a recession. Technically, the pair may retreat to the 107.40 support, from where it could bounce higher should risk demand reemerge. Otherwise, USDJPY could get back to the 107.00 area in the medium term.
by HelenRush
EURUSD threatens 1.09 After some consolidation, EURUSD broke to the downside on Thursday and extended losses to fresh two-year lows just above the 1.09 handle. Despite some intraday bounce, the euro remains under the selling pressure and could suffer further losses amid a resilient dollar across the board. Apart from a resilient greenback, the downside pressure came from another disappointing report in Germany. Import price index came in at -2.7% year over year, below forecasts of -2.6% in August. The dismal figures increase the odds of a recession in the Eurozone’s largest economy and further dent the appeal of the common currency. Technically, a break below the 1.0925 points to the risk of accelerating the downside, while a recovery above the 1.10 handle will help to somehow improve the near-term technical picture. However, building evidence of economic weakness in the region is weighing more on the currency, so the downside pressure will likely persist down the road as the US economy still looks better and may not need a more aggressive stimulus from the Federal Reserve.
by HelenRush
Brent still threatens the $60 handle Crude oil prices declined on Wednesday amid the reports that Saudi Arabia goes ahead of schedule to make the repairs to its oil facility. Besides, Trump left the door open for a path to de-escalation with Iran, which added to the negative sentiment in the market. As such, Brent briefly dipped to the $60.30 area but manages to finish around $61.50. Meanwhile, the EIA report showed a second straight week of rising crude oil inventories. Last week, the stockpiles increased by 2.4 million barrels compared with expectations for a 249,000-barrel decline while gasoline inventories rose by 500,000 barrels. Crude production rose by 100,000 barrels per day, back to its record weekly rate at 12.5 million bpd. The bearish report sent the prices even lower, with the subsequent recovery was due to a better sentiment in the US stock markets. In the short term, Brent crude could resume the downside move should the prices fail to get back above the $62 handle. Despite some optimism over the US-China trade talks, it is not enough to fuel demand for Brent. Moreover, the greenback remains strong and could accelerate the rally should US GDP data surprise to the upside. So the possibility of a break below the $60 psychological support persists.
TVC:UKOIL
by HelenRush
EURUSD: bearish outlook persists EURUSD turned lower on Wednesday after a short-term rise yesterday. The pair still struggles to hold above the 1.10 handle as the 1.1225 intermediate resistance caps the bullish attempts after a rejection from 1.1075 last week. On Tuesday, the common currency derived some support from slightly better-than-expected German IFO data coupled with a modest pullback in the greenback across the board. In particular, business climate improved to 94.6 in September as compared to 94.3 in the previous month. Current assessment rose to 98.5 from 97.4, while business expectation index eased to 90.8. However, the risk sentiment deteriorated amid renewed trade pessimism, so the euro’s uptick lacked any follow-through. Today, the USD demand picked up, which fueled the pair’s retreat, along with other major currencies. The broader picture shows that the bearish outlook remains intact as the prevailing risk-off sentiment and further signs of a recession in Germany will put further downside pressure on the common currency.
by HelenRush
Gold: limited upside slope Gold prices have been in a recovery mode these days as market sentiment remains unstable amid some conflicting signals from geopolitics and economy. The bullion struggled to overcome the $1,525 area yesterday but managed to stay above the $1,500 handle and shows a limited bearish bias early on Tuesday. Dismal economic data from Germany pointed to a rising recession risk and spurred risk aversion across nearly across the board overnight. Further negative news from this front could add to the negative sentiment in risky assets as market concerns are increasing that the world may face a global economic slowdown some time later, with central banks’ shift to a dovish rhetoric confirms this threat. In this context, further negative signals from the economy could fuel demand for safe-haven precious metal in the medium term. Meanwhile, in the near term, the upside may be limited for the bullion due to some signs of a progress in the US-China trade talks that are set to resume in early October. In particular, China has granted new waivers to some domestic state and private firms exempting them from retaliatory tariffs on soybeans imported from the US. Investors may assess this decision as a step towards a deal, which should limit the upside potential for gold at this stage. Technically, the prices need to stay above the $1,500 support in order not to lose the bullish momentum.
TVC:GOLD
by HelenRush
Oil prices will stay afloat Despite the bullish momentum has partially waned after the earlier rally, oil prices remain at relatively high levels and will likely stay afloat in the near term as geopolitical tensions are still elevated, with the prospects for a recovery in the Saudi oil production are looking unclear. Brent slipped below the $64 figure while the bearish momentum is capped by the 100-DMA around $63.50 for now. On the geopolitical front, the U.S. alleges Iran carried out the September 14 attack on Saudi Aramco's largest oil processor. Saudi Arabia also said it was unquestionably sponsored by Iran despite Yemen's Iranian-allied Houthi rebels claimed the assault. Meanwhile, the U.S. Secretary of State Mike Pompeo said the additional troops ordered to be deployed in the Gulf region, which makes traders worry about a potential war with Iran. Against this backdrop, the downside risks for Brent are limited at this stage, with signs of a slower recovery in the Saudi Arabia production will likely keep the prices elevated. Technically, Brent will likely continue to trade above the $60 handle as long as tensions persist. The immediate upside target comes around $64, where the 200-DMA lies.
TVC:UKOIL
by HelenRush
EURUSD outlook remains downbeat EURUSD gains for a second day in a row on Friday but stays in the negative territory in the weekly charts. One week ago, the pair was rejected from the levels above 1.11 which remains the key to the upside, with the intermediate resistance comes around 1.1075. Despite the current recovery attempts, the short-term and broader outlook for the euro remains downbeat. First, the Fed was not as dovish as expected, which reduces the possibility of another rate cut till the end of the year. Second, German economy is on the verge of a recession, and fresh data confirm these fears. In particular, producer prices contracted 0.5% month on month in August and rose 0.3% from a year earlier, with both figures came in lower than expected. Third, the potential US tariffs on imports of EU cars remain on the table, which is also a downside risk for the common currency. As such, the pair may well get back below 1.10 should the sentiment deteriorate. In the near term, euro could also struggle as Fed’s Rosengren who voted against a rate cut on Wednesday delivers a speech later today. Only a firm break above 1.11 will ease the broader selling pressure on the common currency.
by HelenRush
1
Oil stuck in a short-term range After yesterday’s slide, Brent crude is making shallow recovery attempts on Thursday. The prices registered local lows marginally above the $63 handle on Wednesday and has settled in a range limited by the 100- and 200-DMAs and will likely stay within this narrow channel awaiting fresh signals from the geopolitical front. Traders shifted to profit taking after an impressive rally. The bearish correction was extended after Saudi Arabia reassured markets of output restoration by the end of September. Besides, the downside pressure came after the Energy Information Administration reported a crude oil inventory build of 1.1 million barrel after a nearly 6.9-million-barrel draw a week earlier. In general, developments in the Middle East remain in market focus, with traders continue to assess the Saudi Arabia’s capabilities of restoring its oil production. In the weeks to come, the news from the kingdom will set the direction for Brent, but also market participants will closely monitor the signals from the US-China trade front. Any sign of progress in negotiations towards a deal will support demand for oil futures. Technically, Brent needs to get out of the current range in order to decide on a clearer direction, with the immediate support comes around $63 while a break above $65 will improve the near term technical picture.
TVC:UKOIL
by HelenRush
Should we expect a hawkish surprise from the Fed? Citing fairly decent economic data from the US of late, traders trimmed their easing expectations to nearly 60% from over 90% last week. The latest example of robust figures was manufacturing output which posted a stronger-than-expected 0.5% gain in August. Nevertheless, the Federal Reserve rate cut during today’s meeting looks like a done deal amid the lingering concerns over the consequences for the economy from the ongoing trade war with China and signs of slowing growth in general. As such, the dot plot is the key for this meeting. Despite a rate cut, the greenback could stay afloat, unless the central bank provides an outright dovish surprise in the context of further easing and economic projections. Moreover, the dollar may gain support from George and Rosengren as both should dissent again at the meeting. In this scenario, EURUSD will fail to regain the 1.11 barrier and could get back below the 1.10 figure, with the next target comes around 1.0960. But should the Fed disappoint the USD bulls, the euro will spike higher.
by HelenRush
EURUSD set for a rebound While oil market remains the key drivers for the global financial markets, risk sentiment looks subdued, as rising geopolitical tensions in the Middle East curb the appeal of high-yielding assets. Against this backdrop, EURUSD has been on the defensive since the start of the week and has settled around the 1.10 handle. Late last week, the pair failed to get back above the 1.11 intermediate resistance and since struggles to regain the upside momentum. In the near term, the euro dynamics could be affected by German and Euro zone ZEW data and US industrial production report. Also, the European CPI numbers due tomorrow could spur a rebound in the pair should consumer prices get back to the positive territory. More importantly, the Federal Reserve meeting that concludes on Wednesday may send the common currency higher as the central bank is expected to deliver a 0.25% rate cut. This, along with downward revision in the Fed’s dot-plot may trigger a bearish reaction in the greenback across the board. In this scenario, EURUSD could regain ground and challenge the 1.11 barrier. A daily close above this level will improve the short-term technical picture.
by HelenRush
Drones lift oil prices Crude oil prices jumped over 15% early on Monday amid the attack on a Saudi Arabian production facility over the weekend. Brent rose above $68 and then retreated partially but remains elevated as traders assess the damage for global oil supplies which declined by over 5% after the attack was on the world's biggest petroleum-processing facility. Meanwhile, Trump said on Sunday said that the US would be tapping into its strategic petroleum reserve if needed in the wake of attacks on oil sites in Saudi Arabia. Also, Russian Energy Minister Alexander Novak highlighted that there are enough stockpiles to cover shortfall from Saudi Arabia. These comments have somehow played down the impact of the attacks on Saudi oil facilities. Nevertheless, the bullish sentiment in the market will likely persist in the market in the short term as traders have now realized that oil infrastructure is highly vulnerable to attacks, and the market didn’t price in this factor before. The initial support for Brent now lies around $66, while a more important area for bulls comes at $64, where the 100- and 200-DMAs have settled.
TVC:UKOIL
by HelenRush
Oil is poised for a long-term decline Oil prices recovered from the recent lows, but the upside potential is still limited due to oversupply concerns. The recent geopolitical developments bode ill for oil bulls as the market surplus is set to grow into the next year and beyond and push the prices towards new lows, according to the recent report published by the International Energy Agency. A small deficit in the second half of 2019 will transform into a surplus in 2020 as more and more oil will hit the market. Iran and American shale oil producers are the usual suspects responsible for the oversupply. OPEC+ will also have a hard time discussing the future of the production cuts agreement that will expire in March 2020 as surging non-OPEC oil production might discourage some countries from further cuts. However, the surplus will continue growing even if the group of major oil producers, which includes Russia, maintain their production at current levels until 2020. Brent crude, the international oil benchmark, has recovered from Thursday’s low of $58.92 to trade at $60.43 at the time of writing. The US benchmark WTI has settled at $55.20, off the recent low of $54.01. While the upside correction is a clear possibility in the near future, the long-term perspectives remain dim and unfriendly.
TVC:UKOIL
by HelenRush
Oil markets recover from shock Oil prices attempt a recovery after a devastating collapse triggered by news that US President Donald Trump considered easing sanctions on Iran. Brent crude settled at $61.25 after a short-lived dip below $61.00 to $60.53; while WTI is changing hands at $56.27 at the time of writing, off the recent low registered at $55.61. The upside momentum offers a much-needed respite to oil markets, however, at this stage, it qualifies as a natural technical correction after a strong movement. The downside may be resumed as long as the idea of easing Iranian sanctions floats around. Obviously, the market will be looking for additional signals, staying vigilant to new developments in the U.S.-Iran relationship. Thaw in relations is likely to result in more Iranian oil flowing into the oversupplied market. In a separate development, the US Department of Energy reported that diesel stockpiles expanded by 2.7 million barrels during the last week, which came as a surprise because the markets were expecting a withdrawal. This news added to the downside pressure on Wednesday and may still have a negative effect on the markets into the end of the week. Also, OPEC+ members meet today in Abu Dhabi. Investors will watch the event closely to see if deeper production cuts are in the works. Comments from a newly appointed Saudi Arabia Minister and his Russian counterpart Alexander Novak, who told the reporters on Wednesday that Russia would oppose new cuts.
TVC:UKOIL
by HelenRush
Get ready for EUR/USD roller-coaster moves The euro has recovered from the previous week’s low of $1.0925; however, the upside potential of the single currency is limited as the market players prefer to postpone the investment decision before the European Central Bank delivers its monetary policy decision. At the time of writing, EUR/USD is changing hands at $1.1035, unchanged from this time on Tuesday. According to the consensus expectations, the ECB is ready to administer another shot of stimulating measures to the weakening European economy. The central bank is likely to cut interest rate and extend its bond-buying program. These measures usually produce a bearish effect of currencies as they lead to a reduced return on the assets denominated in such currency. However, this time may be different as euro retains bullish potential in case Mario Draghi and Co fails to impress the market with something truly nuclear. Moreover, if investors sense that the ECB has not been bold enough, the initial market reaction may be brutal with EUR/USD moving above $1.11 in a matter of minutes. This scenario is confirmed by the developments on the options markets, where traders are pricing in 0.15% cut in deposit rate and a relaunch of the central bank’s asset-purchasing program.
by HelenRush
Saudi energy minister removal fails to derail oil market Saudi Arabia’s decision to replace its energy minister created a sense of uncertainty on the market; however the prices resumed the growth and refreshed new highs on Monday. During early Asian hours on Tuesday, the international oil marker Brent crude hit an intraday high above $63.00 and swiftly dropped to $62.70 by the time of writing. West Texas Intermediate - the US benchmark - shows similar momentum: WTI retreated from $58.40 to $58.00. A decision to replace Khalid Al-Falih, one of the oil industry’s most powerful figures, may produce a long-lasting ripple effect on the industry, where the personality of now the former Saudi energy ministry and his personal connections played a vital role in reaching the agreement between OPEC and non-OPEC countries on limiting oil supplies. Prince Abdulaziz bin Salman, the son of Saudi Arabia’s King Salman will take the position. Notably, this decision breaks a tradition that royal family members are not appointed to the position. While the experts believe that the reshuffle will not lead to a major change in Saudi energy policy. However, the new minister may be more vigilant to promote measures focused on oil price growth. Anyway, the oil markets will watch Abdulaziz steps closely. The new Energy Ministry will speak at the World Energy Congress that will take place later this week in Abu Dhabi.
TVC:UKOIL
by HelenRush
British pound hits a brick wall British pound attempted a recovery on Monday and reached the highest level since July; however, the upside failed to gain traction. GBP bulls seem to have bumped into a brick wall on the approach to $1.2350 despite some positive developments on Brexit front. Speaking at a press conference with the Irish leader Leo Varadkar, the U.K. Prime Minister Boris Johnson pointed out that he would prefer to strike a Brexit deal by October. This positive stance helped to ease concerns about hard Brexit and improve market sentiments. Traders that expected a disorderly no-deal Brexit on October 31 rushed to close their short positions and thus pushed GBP price off the recent lows. Notably, GBP also gained support from better-than-expected macroeconomic data published on Monday. Thus the recent report on Industrial Production registered a minor growth (+0.1% m/m) in July, while the market expected a decrease (average forecast -0.3% m/m). Trade balance edged higher to -9.144B in July from -8.900 billion in June; however, the market expected -9.500 billion. All-in-all, the recent statistics dispelled the fears about an imminent recession in the British economy. Looking forward, a lot of negative Brexit-related developments have been already priced-in by the market. It means that the coin has drained its bearish potential for the time being. Provided the Brexit delay bill gets royal approval, the risks of a messy Brexit will diminish significantly, creating a positive environment for GBP recovery.
G
by HelenRush