The rise of Oil prices overspills to other markets

Peter Iosif, ACA, MBA IronFX

BoC expected to stand pat

In today’s American session, we highlight from Canada, BoC’s interest rate decision. The bank is widely expected to remain on hold, while the market also seems to be currently, marginally pricing in a rate hike in the December meeting. Should the bank keep rates unchanged, which is also our base scenario, market attention may turn towards the bank’s forward guidance. A possibly hawkish tone, could support the Loonie, while a neutral stance or even a dash of dovishness could weigh on CAD.

US equities slip as Oil and bond yields rise

US equities slipped yesterday and its characteristic that S&P 500, Nasdaq and Dow Jones ended their day in the reds. On a fundamental level, the rise of oil prices increased the uncertainty of market participants about inflationary pressures in the US economy but also a possible squeezing of profit margins. Furthermore, the rise of US bond yields intensifies market concerns on a fiscal level, causing a more cautious approach by market participants, also weighing on US equities.

Renewed US attacks push Oil prices higher

In maybe the most consequential movement in the markets yesterday, oil prices rose, as US and Iran exchanged fresh strikes, with the issue overspilling in the FX and equities markets. The developments maintain, if not intensify, market worries for the supply side of the international oil market pushing oil prices higher. A possible easing of tensions between the US and Iran, could allow oil prices to drop.

USD’s strengthening continues to weigh on Gold’s price

Gold’s price continued to fall yesterday, negatively reacting to the strengthening of the USD. Market worries for high oil prices and persistent inflationary pressures in the US economy, fanned expectations for the Fed to tighten its monetary policy. Furthermore, the rise of US yields has made bonds more attractive as an alternative investment to gold.

Other highlights for today

In today’s American session, we get from the US, August’s ADP national employment figure, the US factory orders for July and the weekly EIA crude oil inventories figure, while the Fed issues the Beige book. In tomorrow’s Asian session, we get Australia’s trade data for July and China’s rating dog Services PMI for August, while RBA Ass. Governor speaks.

Charts to keep an eye out

USD/CAD used the 1.3880 (S1) support line as a platform to rise higher in today’s Asian session. We maintain a bullish outlook for the pair and intend to keep as long as the upward trendline guiding it remains intact. Yet we also warn that the RSI indicator has not surpassed the reading of 50, implying an evaporation of the bearish market sentiment but no bullish outlook. Should the bulls maintain control over the pair’s direction, we may see it aiming if not breaking the 1.3990 (R1) resistance line. Should the bears take over, we may see gold’s price breaking the 1.3880 (S1) support line. continue to break also the prementioned upward trendline, in a first signal that the upward movement has been interrupted and start aiming for the 1.3730 (S2) level.

WTI’s price continued to rise yesterday breaking the 88.60 (S1) resistance line, now turned to support. In continuance of yesterday’s opinion we switch our sideways motion bias in favour of a bullish outlook and intend to keep it as long as the upward trendline guiding oil prices remains intact. Should the bulls control WTI, we may see its price aiming if not breaking the 93.30 (R1) line with the next target for the bulls being set at the 98.50 (R2) area. Should the bears be in charge, WTI’s may break the 88.60 (S1) line, break also the upward trendline and start aiming if not reaching the 72.00 (S2) support base.

Calendar follows

USD/CAD daily chart

Support: 1.3880 (S1), 1.3730 (S2), 1.3550 (S3).
Resistance: 1.3990 (R1), 1.4125 (R2), 1.4245 (R3).

WTI daily chart

Support: 88.60 (S1), 82.00 (S2), 76.60 (S3).
Resistance: 93.30 (R1), 98.50 (R2), 103.65 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

GBP/USD declines to near 1.3500 as US-Iran tensions rise

The GBP/USD pair declines to near 1.3500 during the early European trading hours on Wednesday. Ongoing tensions in the Middle East provide some support to a safe-haven currency such as the US Dollar against the British Pound. All eyes will be on the US August jobs report later on Friday.

EUR/USD falls to two-week low below 1.1600 on broad USD strength

EUR/USD remains under bearish pressure after closing in negative territory on Tuesday and trades at its lowest level in two weeks below 1.1600 on Wednesday. As tensions in the Middle East escalate further, the US Dollar gathers strength on risk-aversion and hawkish Fed repricing, forcing the pair to stay on the back foot. Later in the day, private sector employment data from the US will be watched closely by market participants.

Gold recovers above $4,300; upside seems capped as Fed bets support USD

Gold recovers early lost ground to a four-week low, and trades above $4,320 heading into the European session. A modest US Dollar pullback is seen as a key factor supporting the commodity, though any meaningful upside seems elusive amid hawkish US Federal Reserve expectations. The escalating Middle East conflict lifted crude oil prices to a fresh high since July 24, stoking inflation fears and reaffirming bets for a Fed rate hike in September.

WTI advances to mid-$90.00s, fresh high since July 24 amid escalating US-Iran tensions

West Texas Intermediate (WTI) – the benchmark US Crude Oil price – scales higher for the third straight day – also marking the fifth day of a positive move in the previous six – and climbs to a fresh high since July 24 during the Asian session on Wednesday.

ADP Employment Report is expected to show a moderate increase in private payrolls in August

The Automatic Data Processing Research Institute will release its monthly report on private-sector job creation for August next Wednesday. The ADP Employment Change report is expected to show that the United States private sector added 47K new positions this month, little changed from the 44K new jobs reported in July.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.