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Denis Sergienko • 2022-09-05

Crude oil rebounds amid energy crisis but off in the US, Canada limit the moves

Crude oil rebounds amid energy crisis but off in the US, Canada limit the moves

Global markets begin the week on a back foot even as the extended weekend in the US and Canada tried to chain the bears. The weekend headlines suggest more pain for Europe join the fresh Sino-American tussles to weigh on the risk appetite. Alternatively, Friday’s jobs report reduced the hawkish Fed bets but the US dollar resists accepting the doves.

That said, the USD Index (DXY) rose to a fresh high since 2002 and drowned major currencies. USDJPY refreshed its 24-year peak and the EURUSD also slumped to the fresh low in 19 years. Further, AUDUSD dropped the most among the major currency pairs, mainly due to its linkages with China and risk barometer status.

Elsewhere, gold remained mildly offered above $1,700 but oil ignored the risk-off mood, firmer US dollar and lured bulls to jump over 2.0% a day.

Cryptocurrencies couldn’t ignore the strong US dollar and challenges to sentiment, in addition to the fears of more regulations.

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Following are the latest moves of the key assets:

  • Brent oil extends Friday’s recovery towards $97.00, up 2.0% on a day.
  • Gold reverses the previous day’s gains around $1,707, down 0.20% at the latest.
  • USD Index rose to a fresh high since late 2002 before easing to 110.00, up 0.37% intraday by the press time.
  • FTSE remains indecisive but DAX and Eurostoxx drops 2.95% and 2.67% daily of late.
  • Wall Street marked losses on Friday wherein Nasdaq led the bears with 1.31% daily loss.
  • BTCUSD and ETHUSD both lose near 1.0% as the bears attack $19,800 and $1,550 respectively.

US, Canada holidays can’t tame risk-aversion

Although the key markets are off for Labor Day, leaving the Treasury yields intact, the sentiment remained sour and fuelled the US dollar to the north.

G7 price caps teased Russia to halt the energy exports to the European Union (EU), which in turn amplified fears of economic slowdown. On the same line were the US-China tussles over Trump-era sanctions and Taiwan. Furthermore, softer China PMI adds strength to the grim concerns.

It should be noted that the risk-aversion not only drowned the major currencies versus the US dollar but also exerted downside pressure on commodities amid an otherwise sluggish session.

Fears of more supply crunch propelled the oil prices but gold remained depressed while waiting for more catalysts, like this week’s central bank decisions.

ETHUSD and BTCUSD reversed Friday’s rebound as post-NFP optimism fades. Also weighing on the cryptocurrencies are fears of more bankruptcies in the industry.

  • Strong buy: USDJPY
  • Strong sell: ETHUSD
  • Buy: USD Index, USDCAD, Nasdaq
  • Sell: DAX, FTSE 100, gold, BTCUSD

OPEC+ eyed

Although the economic calendar appears light for Monday, the monthly meeting of OPEC and its allies including Russia, known as OPEC+, seems to be an important catalyst for the day amid strong oil prices. Also important will be the headlines surrounding US-China relations and the European crisis. It’s worth noting that the off in the US and Canada may restrict the market moves during the later part of the day but the risk-aversion is less likely to fade. Additionally, the UK Tory Leadership Contest’s results will also be important to watch for clear directions, mainly for the GBPUSD traders.

May the trading luck be with you!