Crude oil ended higher in its third positive close out of the past four weeks, thanks to ongoing Middle East tensions, falling US crude inventories and storm Barry in the Gulf of Mexico – all raising short term supply shock risks. But Hurricane Barry was not as destructive as feared after making landfall on the Louisiana coast on Saturday with winds barely meeting hurricane criteria. For that reason, crude oil speculators evidently took profit on Monday which saw prices fall noticeably. Both oil contracts started Tuesday on the front ahead of US oil inventories data.

Monday's selling did indeed look like it was driven by profit-taking and technical selling given the small ranges oil prices had traded around in the closing days of last week, after a burst of bullish momentum earlier in the week had probably seen speculators tighten their stop loss orders to protect their profits from evaporating in what is a headline-driven market. In addition, both contracts had reached key resistance levels with Brent at $67/68 and $60/61 rage, levels which were formerly support and now resistance. Unless these resistance levels break, there is a risk we may see a deeper pullback in the coming days amid concerns over Information Administration (EIA) tomorrow afternoon a deteriorating demand outlook.

On the supply side, traders will be watching the latest US oil inventories data closely after the recent sharp falls in oil stocks. If we see more unexpectedly sharp de-stocking in crude inventories, then this could keep prices supported for a while yet. However, if a bigger build is reported then this will likely give speculators an excuse to sell oil aggressively after the recent rally, which may have potentially ended following Monday's sell-off around the resistance levels mentioned above. The American Petroleum Institute (API) will report their unofficial figures tonight ahead of the government data from the Energy Information Administration (EIA) tomorrow afternoon.

Ahead of these, Brent and WTI were both hovering just below the lower end of their respective resistance areas of $67.00 and $60.00 after starting the session on the front foot. So, there was the potential for prices to turn lower given yesterday's bearish-looking price candles.

Figure 1:

Brent

Risk Warning Notice Foreign Exchange and CFD trading are high risk and not suitable for everyone. You should carefully consider your investment objectives, level of experience and risk appetite before making a decision to trade with us. Most importantly, do not invest money you cannot afford to lose. There is considerable exposure to risk in any off-exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of the markets that you are trading. Margin and leverage To open a leveraged CFD or forex trade you will need to deposit money with us as margin. Margin is typically a relatively small proportion of the overall contract value. For example a contract trading on leverage of 100:1 will require margin of just 1% of the contract value. This means that a small price movement in the underlying will result in large movement in the value of your trade – this can work in your favour, or result in substantial losses. Your may lose your initial deposit and be required to deposit additional margin in order to maintain your position. If you fail to meet any margin requirement your position will be liquidated and you will be responsible for any resulting losses.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD holding onto gains amid trade wars, ahead of German IFO

EUR/USD is trading around 1.1150, consolidating its gains after the escalation in US-Sino trade wars sent US yields and the greenback lower. German IFO Business Climate is next.

EUR/USD News

GBP/USD consolidates amid Brexit uncertainty

GBP/USD is trading below 1.2300, consolidating its gains. The UK and the EU have been blaming each other for a potential no-deal Brexit. US-Sino tensions are in play as well.

GBP/USD News

USD/JPY drops back below 105.50 amid US-Japan trade news

USD/JPY filled in the bearish opening gap and jumped to 105.78 highs amid upbeat comments from Chinese VIce-Premier Liu on trade before reversing sharply below the 105.50 level following reports on US-Japan trade progress. 

USD/JPY News

Forex Today: Trade wars paint markets in red, Brexit looks worse, and central banks are limited

Here is what you need to know on Monday, August 26th: The US-Sino trade war is painting global markets in the red. The US dollar is losing some ground to major currencies as yields plunge, while it gains against commodity currencies. Gold is rising and oil is falling.

Read more

Gold: Risk-off rally stalls after US, China aim to calm trade war fears

Having surged to the fresh high since April 2013, Gold declines to the intra-day low of $1,538.50, before taking rounds to $1541.60, by the press time of early Monday. China shows readiness to have a calm discussion with the US.

Gold News

Majors

Cryptocurrencies

Signatures