Crude oil price recovers modestly to 71 Monday in Asia. However, in the near-term we continue to see downside risk on the black gold as worries about fuel demand haunt. Moreover, crude oil has been highly driven by USD. Without seeing the dollar's correction resumed, it's difficult for oil to make new high.

Stock markets in Asia surge as US' job data released last Friday boosted optimism that the worse of recession has been behind us as the pace of recovery is faster than what previously anticipated. In Japan, machinery orders rose +9.7% mom in June, compared with consensus of +2.6%, and-3% in the previous month. The first rise in 4 months sends the Nikkei 225 Stock Average +1.2% higher to 10539. The MSCI Asia Pacific Index adds +1.4%.

USD continues to trade near 1-week high against major currencies. Against the euro and pound, the greenback is hovering around 1.42 and 1.67 level, respectively. US unemployment rate unexpectedly declined to 9.4% in July from 9.5% in June with contraction in non-farm payrolls (-247K) came in much lower than consensus. This has spurred speculations that the Fed will deliver a less dovish tone on monetary policy at the FOMC meeting last this week. CFTC's Fed Funds futures suggests a 60% chance that the Fed will lift its policy rate from the current range of 0-0.25% by January. The bet was 52% a month ago.

Gold price is being pushed lower on the firmness of USD. Trading around 955 in Asian session, we believe the yellow metal's near-term outlook remains consolidative. While gold's upside will be limited by USD's strength and sluggish investment demand, physical buying should emerge as it drops to around 900 level .

Commitments of Traders
  • Crude Oil: Net speculative long positions surged to 34145 contracts, the highest in 5 weeks, traders expected oil demand would recover as driven by better economic outlook
  • Natural Gas: Net shorts increased further despite increase in gas price on weekly basis. The trend is still bearish as investors remained concerned about the huge gas storage
  • Gold: Net speculative long positions gained 20K to 193514 contracts. While capital outflow was seen in ETF, futures trading remained buoyant
  • Silver: Net speculative long positions for silver to 4-week high as 23849 contracts. Should market sentiment remain robust, silver price should outperform gold as industrial demand for silver should pick up as economy recovers
  • Platinum: Net long positions rose to 12001 contracts, the highest since July 2007, Signs of recovery in auto sector fueled speculations on better demand outlook