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Oil rally may stall Oil shows biggest gains in two years, gaining over 8% this week after a rebound by nearly 10% a week earlier. As such, Brent has returned to the bullish market territory following aggressive losses during the fourth quarter. Still, the prices are still nearly 30% lower that the October highs above $86, so there is still room for a rally that could continue in a positive environment in the global financial markets. Despite some progress in the US-China trade talks and signs of warming relations between the two world’s largest economies, the uncertainty over the trade deal continue to make investors cautious, which in turn could cap further upside potential in the crude oil market. Traders will closely monitor further developments on this front, with another round of talks will take place in late January. Technically, Brent needs to confirm a break above $62 in the short term. The key local support now comes at $60. As long as the prices stay above this psychological level, the positive momentum prevails and could send the barrel to fresh one-month highs. The immediate resistance level comes at $62.50. In late November and early December, this area capped the bullish attempts, so it may be tough enough to break, especially ahead of the weekend, when traders are tempted to take profit after a decent rally.
OANDA:BCOUSD
by arumcapital
1
AUDUSD runs into key resistance After the flash crash that look place a week ago, AUDUSD has been on the rise due to a combination of two major drivers. First, the aussie is benefiting from improved risk sentiment amid some progress in US-China trade talks. By the way, China’s commerce ministry reported that the country is in close contact with the US over next stage of talks. Such a positive rhetoric could further support high-yielding currencies including AUD. Second, the greenback continues to lose ground amid a more ‘dovish’ Fed tone. The FOMC meeting minutes confirmed that the central bank shifts towards a more cautious stance in policy tightening, while a number of Fed officials signal the need to make a pause in hiking. As a result, investors continue to price out rate hikes in 2019, which makes the greenback struggle nearly across the board. Even as the buck is on the defensive, further ascent in the AUDUSD pair is under question. The price has run unto an important local resistance around 0.72 and could retreat from the current levels if crude oil prices remain under a local pressure – Brent has slipped from highs above $61 and now tries to stay above the $60 hurdle. To break the 0.72 figure, the aussie needs some fresh catalyst.
by arumcapital
2
Oil market: too early to call a victory Crude oil prices are rising for an eights session in a row, which is the longest winning streak since mid-2017. In late December, Brent found a bottom marginally above the $50 handle and rallies since then. On Wednesday, the prices approached the psychological barrier at $60 amid the widespread optimism over the US-China trade talks. By the way, China’s foreign ministry confirmed today that longer-than-expected negotiations suggest the two countries are very serious in trade talks, which could further support risk-on sentiment in the global markets including oil. Investor optimism over trade is fuelling oil prices amid the easing concerns over the global slowdown and in turn over the global oil demand. So the actual progress in talks does matter for Brent in this context. But this is not enough to fuel further sustainable rally in crude as traders need to see positive developments in the oil market itself to get the barrel out of the bearish market. In the short-term, Brent could retain the bullish tone but the risk of a downside correction is rising as the $60 level could deter the bulls and give room for a local profit-taking. Besides, the buyers could become exhausted after an aggressive rally since late-December. But the potential pullback will likely be limited as long as investors continue to cheer the warming of relations between the US and China.
OANDA:BCOUSD
by arumcapital
Trade talks and FOMC minutes in focus US-China trade talks continue, lifting market sentiment marginally amid the optimism and hopes of some progress or a breakthrough in relations. While the two countries may reach some arrangements, it is still too early to expect a deal announcement as the trade issues are too deep and complicated to be resolved quickly. So if the possible progress doesn’t meet investor expectations riskier assets will be disappointed while the greenback could extend its timid corrective rebound. However, the downside risks for the dollar are still here. On Wednesday, FOMC meeting minutes could show that the Federal Reserve is preparing to take a pause in tightening this year, citing moderating growth globally. By the way, in December, it was the first time in over two years that the Fed had lowered its forecasts rather than raising them. According to the latest Powell’s comments that were more cautious than previously, the bank is really preparing the ground for at least a more moderate tightening down the road. Investors are now focused on the signals from the Fed and the upcoming meeting minutes could bring more volatility to the markets. The dollar may resume its decline after the current rebound and finish the week on a weaker footing if Powell’s speech on Friday comes as ‘dovish’.
NSE:DOLLAR
by arumcapital
EURUSD: risks skewed to the upside A better risk sentiment makes the dollar stay on the defensive on Monday, with traders continue to digest Powell's dovish comments from Friday and cheer the positive background on the trade front. As such, EURUSD further gains ground though the moves are still limited by a range of 1.13-1.15 which looks like a battleground for bears and bulls. The Chinese foreign ministry spokesman Lu Kang reported that China is willing to resolve trade disputed with the US on equal footing. In this context, the World Economic Forum could draw investor attention. The event is scheduled to take place on 22 to 25 January in Davos, Switzerland. Trump and some Chinese officials will attend the forum, and markets will hope that some talks will take place, though it’s unlikely to happen. So far, the positive comments are enough to fuel investor optimism and support high-yielding currencies including the euro. Another meaningful bullish factor for the single currency is the dollar widespread weakness amid further signs that the Fed will take a pause. Following Powell's comments on Friday, markets are already not pricing in any rate hikes this year and it’s now very likely that the central bank will sit on its hands at least during the first quarter. Further expectations will depend on the incoming economic data. Technically, EURUSD is still stuck in the 1.13-1.15 range, with the immediate resistance levels come at 1.1450, 1.1476, where the 100-DMA lies, and 1.15. The 1.15 barrier remains the local ceiling for the pair at this stage and as long as the price is below this handle, there is a correction risk. However, considering the souring dollar sentiment, the balance of risks for EURUSD are clearly skewed to the upside, while the bearish potential is limited.
by arumcapital
Gold rally may take a pause Gold prices extended their bullish breakout on Thursday, with the bullion rallied to fresh mid-2018 highs marginally below the $1.295 figure. The yellow metal has been on the rise for a third week in a row, and looks set to regain its appeal further in the longer run. However, the short-term picture suggests that the prices could see a pullback before another bull run towards the $1.300 handle takes place. Friday morning, the bullion jumped to $1.298 but failed to sustain momentum and pulled back slightly. The current strength in the precious metal is mainly due to a combination of weaker dollar and the risk-off sentiment that prevails in the financial markets due to a number of concerns, from slowing global growth to the political uncertainty in the US. Another bullish factor for gold that seems to be emerging now is that the market is taking a step back in the Fed rate hike expectations. In particular, the Fed fund futures market is now pricing in a nearly 40% chance of a rate cut by the end of 2019. Should the incoming US economic data further point to a slowing growth, the ‘dovish’ outlook will get more entrenched. Such a scenario will play into gold’s hands and could send the metal rally. In the short term, however, there is a risk of a marginal bearish correction in prices as the bullion has come close to the psychological level of $1.300 which could attract a partial profit-taking. Today, Fed’s Powell speaks in Atlanta. Should he refrain from signaling a pause and sound not as ‘dovish’ as investors expect, the greenback could see a local upside correction. In this case, gold may retreat below $1.292, where buyers will reemerge later.
TVC:GOLD
by arumcapital
Oil market: upside correction is unsustainable The first trading day of the year was rather volatile across global markets including oil. Brent crude jumped aggressively after some consolidation earlier in the day, with the prices reached nearly two-week high of $56.50 but settled below the $55 figure ultimately. The rally in the crude oil market was rather a correction though than a sustainable recovery as the fundamentals remain unconvincing and the global risks are still in play. Chinese data showed that the factory activity contracted for the first time in over two years in December and was the weakest since February 2016 at 49.7. The disappointing reading added to the ongoing worries over a slowing global economy as well as the US Markit manufacturing PMI for December which came in at the lowest since September 2017. Moreover, it was reported that Russian crude oil production hit a post-Soviet record in 2018, while Iraq boosted oil exports in December. Against this backdrop, Brent will hardly be able to catch a bid further in the short term unless the global investor sentiment improves significantly. Today, the oil market will further monitor the signals from stocks, while later in the day, traders will focus on the API data that could give some lift to prices should the report point to a contraction of crude oil stockpiles in the US. Technically, Brent needs to settle firmly above the $53 figure in order to proceed with its correction. However, there is still a risk of profit-taking as the barrel continues to look attractive as a sell on rallies.
OANDA:BCOUSD
by arumcapital
The dollar could outperform the euro Equities sentiment continues to sour on the first trading day of 2019, which doesn’t bode well for the euro and gives further lift for the yen and other safe haven assets. The greenback receives some reprieve against the European currencies as well.  EURUSD touched late-October highs marginally below the 1.15 barrier earlier in the day but turned negative as the psychological level attracted the selling interest once again. Market participants continue to sell the single currency on rallies due to growing concerns over the euro zone economy. As a reminder of slowing growth, the major December PMI prints in the euro zone showed that the indexes start heading into contraction territory and could hit in the months to come.  In turn, further bearish signals from the regional economy could make the ECB refrain from hiking rates this year. So the ‘hawkish’ rhetoric will further be pushed back. Despite the risk of slower tightening by the Federal Reserve, the monetary policy divergence will still play into dollar’s hands.  At the same time, the buck will likely underperform the yen as the Japanese currency demand will remain elevated due to a number of global risks including slower economic growth momentum, less fiscal stimulus, trade wars and other factors.
by arumcapital
Gold will continue to shine in 2019 Gold finished off the year on a firm footing and could be poised for an even more vigorous rally in the months to come. The yellow metal closed at six-month highs above $1,280 in December and looks set to develop its ascent against the backdrop of the ongoing turbulence in the global financial markets. The widespread dollar weakness seen towards the end of 2018 contributed immensely to a spectacular recovery in gold prices from a low of $1,160 registered in August. By the way, December was the best month for the metal since June 2016. As for the market outlook for 2019, gold demand will likely continue to pick up as the greenback is set to further lose its appeal. Trump’s trade tensions with China may yet shake up markets in general and the dollar in particular. By the way, investors around the globe fear that some of the biggest and most dangerous risks in 2019 will come from Washington, where the ugly political landscape will serve as a source of volatility and uncertainty. In turn, such a combination suggests that market participants will continue to prefer gold over the dollar. Given the fears of further sell-off in equities and the prospects for a more ‘dovish’ Fed, gold may become the key safe haven for investors who become more and more disappointed in the dollar and the US Administration policy. From a technical perspective, the precious metal is trading close to the key resistance at $1,300. A break above this barrier will further brighten the technical outlook for gold with the nest target at $1,1350. It doesn’t mean that the potential way north will be straightforward and smooth, but investors will likely use the ‘buy the dip’ strategy.
TVC:GOLD
by arumcapital