There is a saying in sports which is that the more consecutive losses you have, the closer you are to having a win. We are beginning to wonder whether this sentiment will also apply to the oil market, where the WTI contract continued its run of outs with another sharp daily decline.
The 8% daily fall in oil is in some respects a little surprising given that when OPEC meets next month, we know that proposed production cuts will be high on the agenda, but for the moment this is failing to provide a floor, with investors in selling-mode on expectations that supply will be outstripping demand in the short term.
The sharp slide lower in oil hurt the energy sector on Wall Street while tech stocks remain impacted by Apple’s recent declines. Although the selling in the US was not as ferocious as in the previous session, the Dow still gave up 100 points while the S&P 500 had a minor loss and the NASDAQ finished flat.
China-US trade talks were again in the headlines with confirmation by White House official Larry Kudlow that discussions were ongoing, but this only provided a brief respite to the market with red numbers outnumbering green on the major bourses.
Brexit is again in the news and on the surface, it looks like progress is being made with talk that a draft deal has been reached between the UK and the European Union. The British Pound was boosted by this news as it made gains back above the 1.30 level before retreating to the mid to high 1.29’s. Whether such a deal can be passed through the UK parliament is another matter and this may well cap gains on Sterling until something more concrete is agreed upon.
The US Dollar was generally lower as traders took profit after recent gains, with the DXY index around one third of a percent lower against a basket of its peers. The Euro tracked higher for a retest of 1.13 and while it did pull back from this level, the single currency still gained 0.6% against the US Dollar. If some weakness in the greenback persists for another few sessions and 1.13 is indeed cleared, the EURUSD rate may have another crack at resistance around 1.1350.
The Australian Dollar was another currency to benefit from a pullback in the USD, with the AUDUSD rate back above 0.72. Technically, the AUDUSD rate has been looking positive for the past week and this holds true now with RSI’s pointing to potential further gains. However, the release of Australian employment data this week may have a significant say in whether the Aussie Dollar is closer to 0.73 or 0.71 by week’s end.
Looking ahead, we have some key Chinese economic data out today and this could sway sentiment during Asian trading hours, particularly with the US and China trade situation still very much up in the air. While in the US traders will be watching the latest reading on CPI closely after such a strong PPI print last Friday.
For a full list of upcoming data releases, please see our economic calendar here.
The information provided here has been produced by third parties and does not reflect the opinion of AxiTrader. AxiTrader has reproduced the information without alteration or verification and does not represent that this material is accurate, current, or complete and it should not be relied upon as such. The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.
In January the Fed needed to put the Taper Genie back in the bottle; now they need to convince the short end crew to back off repricing the Fed Funds strip