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MTrading Team • 2023-10-09

Crude oil rallies on Israel-Hamas war

Crude oil rallies on Israel-Hamas war

Geopolitical fears dominate the market on early Monday as Israel responds to the Hamas-led deadly attack and abductions during the weekend. More than a thousand people have lost their lives in the last three days due to the war and the same fuelled the market’s rush towards the risk-safety even as the US and Japanese markets are partially closed.

With this, the US Dollar prints the first daily gain in four while paring the previous weekly loss, the first in 12. The same exerts downside pressure on the riskier assets like commodities and Antipodeans. That said, the EURUSD and AUDUSD dropped around half a percent by the press time whereas USDJPY, GBPUSD and NZDUSD print mild losses at the latest. Further portraying the risk-off mood are the US stock futures and the Asia-Pacific shares.

It’s worth noting, however, that the prices of Gold and Crude Oil rallied as the XAUUSD has its traditional haven appeal whereas the Oil justified the supply crunch fears.

On a different page, BTCUSD and ETHUSD remain pressured amid broad risk-aversion and the firmer US Dollar.

Following are the latest moves of the key assets:

  • Brent oil pares intraday gains after a gap-up opening, up 2.65% to $87.40 by the press time.
  • Gold price rises 1.0% to $1,851, extending Friday’s bounce off seven-month low at the latest.
  • USD Index snaps three-day losing streak near 106.60, up 0.50% intraday as we write.
  • Wall Street closed with mild gains but the Asia-Pacific stocks edged lower. On the same line, equities in Europe and the UK post minor losses at the latest.
  • BTCUSD and ETHUSD print mild losses around $27,800 and $1,620 as we write.
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Sour sentiment fuels US Dollar, Gold and Crude Oil

Palestine-based Hamas military group triggered the deadly war on the Gaza Strip two days ago by killing around 700 Israelis and abducting a few dozen before warning to blow up the Israeli airport with around 150 missiles. In reaction, the Israeli military conducted fierce airstrikes near Gaza and have roiled more than 500 Hamas targets. “The Palestinian health ministry said more than 400 people including scores of children had been killed,” said Reuters. Additionally, the Wall Street Journal (WSJ) shared the news suggesting Israel’s archrival Iran’s favor in plotting the Hamas-led attack, which if confirmed will escalate the global geopolitical tension and can propel the market’s risk-off mood. The same is likely to allow the US Dollar to remain firmer.

Apart from the risk-off mood, a rethink on the US jobs report also allowed the US Dollar to remain firm as the employment report for September appeared less impressive but posted upbeat figures. That said, the headline Nonfarm Payrolls (NFP) showed strong hirings but the Unemployment Rate and average hourly earnings came in softer. As per the details, the NFP came in 336K versus 171K expected and 227K prior (revised from 187K) whereas the Unemployment Rate remained unchanged at 3.8% despite expectations favoring 3.7%. Further, the Average Hourly Earnings (popularly known as the wage growth) also eased a bit and poured cold water on the face of the Fed hawks, which in turn weighed on the US Dollar.

It should be observed that the US-China tensions are on the table despite the likely meeting between the Washington and Beijing leaders in November. Also roiling the mood and favoring the greenback, as well as weighing on the Crude Oil, are grim economic concerns outside the US. However, Saudi Arabia’s readiness to increase Oil production if needed to defend the black gold buyers seemed to have recently probed the energy buyers.

Elsewhere, the US consumer trend watcher and regulator braces for fresh restrictions on the Crypto while trying to put e-banking laws in practice over the BTCUSD and ETHUSD usages, which in turn joins the US SEC-inflicted woes to weigh on the cryptocurrencies.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

Partial holiday in US, light calendar ahead…

After witnessing a dull start of the week, due to Japan’s extended weekend, the global markets are likely to witness more boredom as the US bond markets are closed and the economic calendar also lacks major data/events. Even so, the NYSE can entertain the momentum traders by portraying the risk-off mood and favoring havens like the US Dollar, Yen and Gold prices.

May the trading luck be with you!