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MTrading Team • 2023-10-04

Crude oil retreats towards three-week low as OPEC decision, US data loom

Crude oil retreats towards three-week low as OPEC decision, US data loom

Market sentiment remains sour on early Wednesday as upbeat US JOLTS job report and political drama in the US House of Representatives join hawkish Fed signals. Also, fears of market intervention from Japan and China add strength to the risk aversion while looming economic concerns from China, Eurozone and the UK, as well as debt woes from China’s Evergande, also weigh on the risk profile as market players await the key US data and OPEC meeting.

The risk-off mood joined expectations of receding energy demand in the future and hopes of easing supply cuts from the major Oil producers to weigh on the Oil Price. That said, the Gold Price remains depressed at the lowest level in seven months.

Elsewhere, the US Dollar picks up bids to reverse the previous day’s retreat from the yearly high while stocks in the Asia-Pacific zone and the Western stock futures edge lower, tracing the Wall Street benchmarks’ downbeat performance.

NZDUSD drops the most among the G10 currency pairs amid the RBNZ’s status quo while AUDUSD and USDJPY remain mostly unchanged. That said, the EURUSD and GBPUSD also hold lower grounds.

Optimism at the crypto front eased as the battle between the US SEC and the industry players intensified while the options market suggested a bearish bias.

Following are the latest moves of the key assets:

  • Brent oil fades the previous day’s rebound from a three-week low, down 0.80% intraday near $81.60 at the latest.
  • Gold price drops for the eighth consecutive day, mildly offered near $1,822 by the press time.
  • USD Index stays defensive around 107.00 as we write, after refreshing the yearly high the previous day.
  • Wall Street closed with notable losses while the Asia-Pacific stocks edged lower. With this, equities in Europe and the UK remain depressed at the latest.
  • BTCUSD and ETHUSD print three-day losing streak around $27,400 and $1,640 as we write.
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Sour sentiment favors US Dollar

The risk aversion joins the upbeat US JOLTS job report and political drama in the US House of Representatives to propel the US Dollar, especially amid hawkish Fed signals. Further, fears of market intervention from Japan and China, as well as economic concerns about the Eurozone, China and the UK, add strength to the risk aversion.

On Wednesday, US JOLTS Job Openings for August rose the most in three months with 9.61M figures versus 8.81M expected and 8.92M (revised) prior. However, the IBD/TIPP Economic Optimism dropped to the lowest level since August 2011 by printing 36.3 numbers compared to 43.2 market forecasts and 43.2 prior.

Following the data, Atlanta Fed President Raphael Bostic said he sees the next move as a single quarter-point rate cut late next year while adding, “Still 'work to do' but confident underlying price trends are slowing”. On the same line, Federal Reserve Bank of Cleveland President Loretta Mester stated that she is likely to favor a hike at the next meeting if the current economic situation holds.

On a different page, the US House of Representatives is in chaos as 8 Republicans and all Democrats voted to oust Kevin McCarthy after 269 days as the Speaker, the first incident in the US after 113 years. Now, Patrick McHenry is the new Speaker (temporary). Elsewhere, US Treasury Secretary Janet Yellen said that the US has become overly dependent on China for critical supply chains, which in turn flagged more hardships for the Dragon Nation and tough days for the Sino-American ties moving forward. Even so, Yellen also said that the US does not want to decouple economically from China.

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

A busy day ahead…

On Wednesday, a likely softening of the US ISM Services PMI and ADP Employment Change could allow the US Dollar bulls to take a break. However, the expected improvement in the US Factory Orders and S&P Global PMI figures will allow the Fed policymakers to defend their hawkish tone and underpin the US Dollar’s strength. On the other hand, the OPEC JMMC is likely to defend the current output cut and the US is actively refilling the Strategic Petroleum Reserves (SPR) and hence any more bullish commentary from the Oil producers to renew the Oil price, if the US Dollar retreats from the yearly high.

May the trading luck be with you!