Crude Oil prints three-day losing streak on demand woes, US Dollar rebound

Having witnessed a volatile start of the week, traders await this week’s key US data while trying to cheer the dovish Fed bias early Tuesday. Even so, a recovery in the US Treasury bond yields joins political pessimism to help the US Dollar in extending Monday’s recovery moves.

The US Dollar’s rebound contrasts with the Euro’s (EUR) weakness ahead of Thursday’s European Central Bank (ECB) monetary policy meeting weighs on the EURUSD prices. On the same line, USDJPY also braces for July’s Bank of Japan (BoJ) rate hike and defends buyers as Japanese traders return to their desks after a long weekend. Further, GBPUSD stays pressured amid looming economic fears about the UK, despite political optimism in the nation.

AUDUSD, NZDUSD, and USDCAD bear the burden of broadly weaker commodity prices on China's woes and the US Dollar’s corrective bounce despite mostly dovish Fed talks.

Crude Oil remains pressured for the third consecutive day as fears of receding demand from China join the US-China trade war chatters. However, Gold prices stay on the front foot while attacking the key upside hurdle as traders seek solace in the traditional haven in times of uncertainty.

Talking about cryptos, increasing odds of a Trump Presidency superseded the US Dollar’s rebound and allowed the crypto benchmarks to refresh monthly tops. That said, BTCUSD and ETHUSD both marked the biggest daily jumps in eight weeks the previous day before challenging a four-day uptrend early Tuesday.

Following are the latest moves of the key assets:

• WTI Crude oil drops for the third consecutive day, down half a percent intraday to $81.50 by the press time.
• Gold defends the week-start gains near $2,431 while posting mild gains at the two-month high.
• The USD Index extends the previous day’s rebound from a five-week low to 104.40 as we write.
• Wall Street closed with minor gains but the Asia-Pacific markets lacked momentum. Further, equities in Britain and Europe printed mild losses during the initial trading hour.
• BTCUSD and ETHUSD both drop nearly 1.5% intraday to around $63,150 and $3,430 respectively as we write.

Mixed geopolitics favor US Dollar rebound despite dovish Fed bets…

Weekend firing and dismissal of classified documents’ case on US Presidential Election nominee Donald Trump bolstered the odds of a Republican victory in the national elections. The same flagged concerns about heavy tariffs on China, as well as a devaluation of the US Dollar. That said, increasing odds of the US Federal Reserve’s (Fed) rate cut in September and downbeat US data also challenge the Greenback buyers. However, the market’s consolidation ahead of today’s US Retail Sales and Fed talks to defend the “soft landing” bias helped the US Dollar Index (DXY) to recover from a five-week low and snap a three-day losing streak. It’s worth noting that the cautious mood and a corrective bounce in yields underpin the DXY’s run-up early Tuesday, especially when Japan returns from a long weekend.

On Monday, Fed Chair Jerome Powell almost confirmed the market’s bets on the September rate cut by citing the welcome change in the inflation and labor data. On the same line was Federal Reserve Bank of San Francisco President Mary Daly who said, “I see a policy adjustment over the coming term.” The Fed talks and downbeat prints of the US Empire State Manufacturing Index for July, to -6.6 versus -6.0 expected and prior, highlighted the need for lower rates and challenged the US Dollar’s week-start rebound from a multi-day low.

It’s worth noting that Donald Trump’s readiness to levy nearly 60% tariffs on Chinese goods and devalue the US Dollar to improve export demand soured the sentiment and added upside filters to the Greenback’s recovery moves.

The timing for China woes seems difficult for commodity traders as the Dragon Nation reported softer growth numbers earlier on Monday, which in turn exerted downside pressure on the Crude Oil and Antipodeans. Amid these plays, the Wall Street Journal (WSJ) mentioned, “Expectations are low for Xi to make a significant course correction at a Communist Party conclave this week, as he continues to put measures to enhance China’s economic security above other priorities.”

Apart from China-linked woes and the US Dollar’s corrective bounce, statements from the US oil industry group American Petroleum Institute (API) highlighted the consequences of Trump’s tariff plan for the energy market and also exerted downside pressure on the black gold prices. With this, the WTI Crude Oil extends Friday’s retreat from a one-week high while posting a three-day losing streak, down half a percent to $81.50 by the press time.

Given the Crude Oil’s weakness and the US Dollar’s rebound, as well as the Bank of Canada’s (BoC) pessimistic survey of Business outlook, the USDCAD marked the biggest daily jump in a fortnight. On the same line, AUDUSD snapped a four-day uptrend and the NZDUSD closed with losses.

Gold price remains firmer at the highest level in two months as it pokes the $2,431-34 resistance zone amid the market’s rush toward the risk-safety. In doing so, the bullion buyers ignore the firmer US Treasury bond yields and the US Dollar, as well as looming China woes.

Elsewhere, USDJPY recovered from the yearly support line despite holidays in Japan whereas GBPUSD retreated from a year’s high to post the first daily loss in four. On the same line, EURUSD also snapped a three-day uptrend and has been depressed on intraday as traders prepare for this week’s European Central Bank (ECB) monetary policy announcements.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

US Retail Sales, Canada inflation and EU data in the spotlight…

Although political plays in the US will be most exciting to watch, the monthly prints of the US Retail Sales, foreign trade numbers and Canada Consumer Price Index (CPI) data will also offer meaningful directions to the traders on Tuesday. Also important to watch will be the ZEW Survey outcome for Germany and the Eurozone. It should be noted that the speeches from Fed officials will be an additional guide to the market players.

Should US data and Fed talks favor September rate cut odds, the US Dollar may pare recent gains, which in turn can allow commodities and Antipodeans to pare prior losses but the EURUSD sellers may have little to cheer ahead of Thursday’s ECB. That said, the USDJPY might also extend the latest run-up amid growing doubts about the Bank of Japan’s (BoJ) rate cuts whereas GBPUSD lacks upside momentum as economic woes jostle with political optimism in the UK.

May the trading luck be with you!