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Crude Oil Prices Diverged With Risk Trends
Sentiment-linked crude oil prices closed at their lowest in almost a month despite a pickup in risk appetite during Monday’s Wall Street trading session. The S&P 500 ended 0.50 percent to the upside after it was reported that Trump officials downplayed expectations that the country was soon planning on imposing limits on local investment into Chinese markets.
Working against the commodity were two fundamental pressures. The first was a rising US Dollar, which left the Euro at its weakest since May 2017 – as anticipated. The world’s second most liquid currency has been under pressure by rising EU-US trade war fears and disappointing German CPI dataover the past 24 hours. Preliminary September data showed inflation clocking in at just 1.2 percent y/y versus 1.3 expected.
Since crude oil is largely priced in US Dollars, a stronger currency will make it comparatively easier to purchase the commodity. Meanwhile, OPEC Secretary General Mohammad Barkindo noted that Saudi Arabia had fully restored oil production in the aftermath of Yemen’s Houthi drone strike in Abqaiq. Crude oil has now fully trimmed its surge from then.
Tuesday’s Asia Pacific Trading Session
With S&P 500 futures pointing higher, we may see market mood continue to improve at the onset of Tuesday’s Asia Pacific trading session. This would leave the anti-risk Japanese Yen vulnerable while the sentiment-linked Australian Dollar in a better position to rise. But, the AUD/USD will have to wait for follow-through until the RBA rate decision passes. The markets are pricing in a 25bps cut with about 80 percent certainty.
Join me at 4:15 GMT as I cover the RBA rate decision and reaction in AUD/USD
Crude Oil Technical Analysis
Taking a closer look at crude oil prices, the commodity took out rising channel support from August. In addition, the horizontal psychological barrier between 54.55 and 55.41 was also breached. This has left the commodity eyeing near-term support which is also a range between 50.41 and 52.08. Another daily close under 54.55 would further add to this argument.
Crude Oil Daily Chart
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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter