Crude Oil snaps three-day losing streak on US Dollar’s retreat, cautious optimism

The risk appetite remains sluggish early Monday as traders seek more clues to consolidate the previous week’s US Dollar gains. In doing so, the market also portrays anxiety ahead of the Fed’s preferred inflation gauge, namely the Core PCE Price Index, amid a light calendar and mixed news.

With this, the Greenback prints the first daily loss in three and allows the major currencies, as well as commodities, to pare the previous weekly losses. Among them, Crude oil gains major attention amid geopolitical fears and depleting oil rig counts, as well as benefiting from the US Dollar’s pullback.

EURUSD and GBPUSD bounce off multi-day low but the USDJPY hesitates in extending Friday’s retreat from multi-month high amid mixed headlines from Bank of Japan (BoJ) officials and sluggish yields.

Further, Gold price rebounds from the 10-day Exponential Moving Average (EMA) to snap a two-day losing streak but AUDUSD and NZDUSD lack recovery momentum despite pushing back the bearish bias.

Elsewhere, BTCUSD and ETHUSD both lack clear directions after a two-week downtrend amid crypto traders’ indecision at multi-month high prices.

Following are the latest moves of the key assets:

• Brent oil prints the first daily gains in four around $85.90 by the press time.
• Gold price snaps two-day losing streak near $2,166 at the latest.
• USD Index retreats from a five-week high to print the first daily loss in three around 104.35 as we write.
• Wall Street closed mixed while hovering around the all-time high and the Asia-Pacific stocks also edged lower. Further, the shares in Europe and the UK remain indecisive during the initial hour.
• BTCUSD and ETHUSD remain lackluster after Sunday’s heavy run-up to around $67,200 and $3,470 at the latest.

US Dollar bulls take a breather ahead of key data…

Fed Chair Jerome Powell’s defense of the FOMC interest rate projections & citing of inflation fears kept the US Dollar Index (DXY) firmer for the second consecutive week by the end of Friday. That said, Powell spoke at a public event while mentioning that the policymakers expect to cut interest rates later this year, but only once they have greater confidence that inflation is under control. On the same line was Atlanta Fed President Raphael Bostic who shifted his 2024 forecast to only one rate cut 2024 from two mentioned in the latest FOMC.

While the hawkish joined upbeat US data to keep the US Dollar bulls hopeful, Euro failed to cheer an increase in German IFO sentiment figures as European Central Bank (ECB) officials appear less convinced about delaying the rate cuts. Earlier in the last week, ECB President Christine Lagarde and Chief Economist Philip Lane stated readiness to cut the benchmark rates during the late 2024 but policymaker Edward Scicluna said on Friday that a rate cut as soon as April could be warranted.

News that major Chinese banks are selling USD/CNY allowed the risk appetite to improve in the Asia-Pacific zone and helped the commodities, as well as the Antipodeans. On the same line are comments from China Prelimier, Industry Minister and Vice Commerce Minister suggesting more stimulus and upbeat economic transition of the Dragon Nation.

Bank of Japan’s (BoJ) Monetary Policy Meeting Minutes for January pushed back the odds of witnessing heavy rate hikes like the West but showed a likelihood of meeting the inflation target, which in turn allowed the USDJPY pair to extend Friday’s retreat from a multi-month high.

On a different page, news of more geopolitical tensions in the Middle East and the OPEC+ producers’ push for more supply cuts join a slump in the US Oil Rig counts to underpin a recovery in the energy prices after a three-day losing streak.

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

Second-tier data/events eyed…

Having witnessed a sluggish start of the key week, the US New Home Sales and comments from Fed’s Bostic will be eyed for intraday moves and can allow the US Dollar to extend the latest retreat. However, major attention will be given to this week’s US Durable Goods Orders, the final prints of the Q4 GDP and the Core PCE Price Index, which is known as the Fed’s preferred inflation, data for clear directions. Should the scheduled US statistics fail to back the concerns suggesting an easing in prices and firmer employment, the Fed will be pushed for a delay in the rate cuts and the same might help the US Dollar to remain firmer.

May the trading luck be with you!