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MTrading Team • 2024-04-01

Crude oil bulls ignore firmer US Dollar amid upbeat China PMI, supply crunch woes

Crude oil bulls ignore firmer US Dollar amid upbeat China PMI, supply crunch woes

Cautious optimism prevails in the market early Monday even as most of the Western traders are off the desk due to the Easter Monday holiday. The reason could be linked to upbeat China data and mixed updates from Japan.

Amid these plays, the US Dollar stays firmer while bearing the fruits of Friday’s upbeat inflation data and hawkish comments from Fed Chair Jerome Powell. Also favoring the Greenback buyers are comments from the European Central Bank (ECB) officials suggesting sooner rate cuts.

EURUSD licks its wounds at the lowest level in six weeks while GBPUSD fades the previous week’s rebound from the 200-SMA. Further, USDJPY seesaws within a short-term trading range after reversing from the highest level since 1990 in the last week.

AUDUSD and NZDUSD pare the previous weekly losses despite holidays in Australia and New Zealand as China PMIs favor the commodities and Antipodeans.

In addition to the China data, fears of witnessing a supply crunch allowed Crude oil to edge higher while Gold price reached a record high near $2,265.

Elsewhere, BTCUSD and ETHUSD both drop nearly 2.0% intraday while reversing the weekend gains around the multi-month high. The reason behind the cryptocurrencies’ fall could be linked to the market’s consolidation mode ahead of Bitcoin halving, up for April 2024.

Following are the latest moves of the key assets:

  • Brent oil prints mild gains at the highest level in two weeks, up 0.35% intraday near $87.90 by the press time.
  • Gold price rises more than 1.0% to refresh record high near $2,065, close to $2,060 at the latest.
  • USD Index seesaws around the six-week high marked on Friday, close to 104.50 at the latest.
  • Asia-Pacific stocks also edged higher while traders in Europe and the UK remained absent due to the Easter holiday.
  • BTCUSD and ETHUSD both reverse the previous day’s gains by falling nearly 2.0% each to around $69,500 and $3,540 at the latest.
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Crude oil, Gold ignore firmer US Dollar as the key week begins…

The US Dollar stays on the bull’s radar despite a sluggish market due to the Easter holidays. While portraying the same, the US Dollar Index (DXY) seesaws at the highest level in seven weeks, after posting a three-week uptrend, on concerns that the US Federal Reserve (Fed) won’t be in a hurry to cut rates as inflation pressure remains elevated. It’s worth noting that Friday’s US Core PCE Price Index, also known as the Fed’s preferred inflation, matched market forecasts suggesting a minor retreat in the price pressure. Following the data, Fed Chairman Jerome Powell crossed wires while saying that the PCE report is “pretty much in line with our expectations”. Earlier in the last week, the US Durable Goods Orders and GDP also allowed the US Dollar to remain firmer.

While the US Dollar remained firmer, commodity buyers didn’t step back as traders remained convinced about the lower rates from major central banks, sooner or later. Also, China’s official Manufacturing and Non-Manufacturing PMIs for March came in better than expected while the Caixin Manufacturing PMI also jumped to a 13-month high. The same allowed additional strength to the prices of Gold and crude oil.

Furthermore, calls for extended OPEC+ output cuts and escalating geopolitical tensions in the Middle East add strength to the energy prices even as spot trading is closed for the second consecutive day in the major Western markets.

In addition to China data, upbeat prints from Indian economics and optimism about the reelection of Prime Minister Narendra Modi also favor bulls in India, as well as the XAUUSD buyers. It should be observed that India and China are two of the world’s biggest gold customers and hence upbeat catalysts from them propel the bullion prices.

Elsewhere, USDJPY struggles to cheer the mid-March rate hike as most Japanese policymakers remain unconvinced of witnessing further rate increases. Additionally, mixed activity and inflation clues from Tokyo also underpin the Yen pair’s run-up.

That said, EURUSD bears the burden of the US Dollar and concerns that the ECB will precede the Fed in cutting the rates. On the same line is the GBPUSD which stays depressed amid economic woes surrounding the UK.

On a different page, crypto traders remain bearish for the short-term as market players prepare for the Bitcoin halving and weigh on the prices of the BTCUSD and the ETHUSD.

  • Strong buy: USDCAD, USDJPY
  • Strong sell: Crude Oil, US Dollar, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

Sluggish start of the key week…

Given the Easter Monday holiday in major Western markets, the traders are likely to witness a lack of volatility and hence should be cautious as wild spikes could be witnessed on an unimpressive catalyst.

While Monday is less likely to offer any major move, the rest of the week will be interesting as it comprises the final readings of March PMIs from major economies, the US ISM PMI, and employment data for March.

Hence, traders could witness a lack of momentum on Monday but the next few days are likely to be important. That said, commodity buyers are likely to witness a pause in the upside momentum should the US Dollar extend its run-up, especially after the recently firmer US data and hawkish signals from the Fed.

May the trading luck be with you!