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MTrading Team • 2024-05-13

Crude Oil stays pressured on US Dollar rebound and demand-supply concerns

Crude Oil stays pressured on US Dollar rebound and demand-supply concerns

Markets remain slightly offbeat early Monday as traders await the headline US inflation data while defending the previous week’s US Dollar rebound. Apart from the pre-data anxiety, the risk-negative headlines from China and a light calendar also challenge the market’s risk appetite.

It’s worth noting, however, that the EURUUSD edges higher after a four-week uptrend while GBPUSD picks up bids after snapping a two-week uptrend.

Further, AUDUSD and NZDUSD remain depressed on downbeat China clues and unimpressive data from home whereas USDCAD prints the first daily gains in four, so far, amid downbeat Crude Oil prices while ignoring upbeat Canada employment clues.

USDJPY bulls struggle to defend the weekly gains on mixed concerns about the Bank of Japan (BoJ), as well as due to the lackluster US Treasury bond yields, not to forget the cautious mood ahead of this week’s preliminary readings of Japan’s Q1 GDP.

Crude Oil holds lower grounds after falling the most in more than a week the previous day but Gold snaps a two-day winning streak by paring the last weekly gains.

Elsewhere, BTCUSD and ETHUSD both bear the burden of the crypto-negative US regulatory actions while trying to defend the traders/investors.

Following are the latest moves of the key assets:

  • WTI Crude oil remains pressured around $78.00 after falling the most in more than a week the previous day.
  • Gold snaps a two-day uptrend while retreating from the highest level in three weeks to $2,351 by the press time.
  • The USD Index stays defensive near 105.30 after positing the weekly gains.
  • Wall Street closed mixed and the Asia-Pacific shares drift lower. Further, British and European shares remain dicey during the initial trading hour.
  • BTCUSD and ETHUSD both remain pressured for the day near $61,200 and $2,900 as we write.
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US Dollar prepares for inflation data…

US Dollar benefits from the market’s dicey mood while defending the previous week’s gains, especially after witnessing Friday’s upbeat inflation expectations. In doing so, the Greenback justifies hawkish comments from the Federal Reserve (Fed) officials while cheering the risk-negative headlines about China and the Middle East.

On Friday, the first readings of the US University of Michigan (UoM) Consumer Sentiment Index for May dropped to a six-month low. However, the inflation expectations for the next 12 months jumped to the highest level since November 2023 and allowed the US Dollar to print a weekly gain.

Apart from that, China’s downbeat Consumer Price Index (CPI) and Producers Price Index (PPI) data, published during the week, joined fears that the dragon nation will need extra funds in the system to defend the economic transition to propel the US Dollar. Further, concerns that US President Joe Biden’s administration will slap huge tariffs on China during this week’s review also roiled the sentiment and favored the Greenback, especially amid firmer yields. Additionally, China’s first fall in credit, per the Bloomberg data, since 2017 also flags fears about the world’s biggest commodity user.

It should be observed that the downbeat China data propelled odds of witnessing the People’s Bank of China’s (PBoC) rate cut and the same weighed on the domestic currency, as well as the commodities and Antipodeans, especially amid a likely sale of the 20, 30 and 50-year Treasury bonds.

In addition to the firmer US Dollar and China news, comments from Iraq also exert downside pressure on the crude oil prices. That said, Iraq’s energy minister said during the weekend that they won't agree to any additional cuts at the June 1 OPEC+ meeting.

Like crude oil, the Gold price also witnessed hardships as it pares the previous weekly gains and retreats from a one-month-old falling resistance line amid a firmer US Dollar and due to China’s status as one of the world’s biggest Gold customers.

On a different page, the European Central Bank (ECB) officials’ hawkish commentary allows the EURUSD pair to battle with the US Dollar bulls while GBPUSD edges higher amid the recent signals from the UK suggesting a delay in the rate cut from the Bank of England (BoE). That said, the UK’s Q1 2024 GDP came in firmer on Friday whereas the British employers suggest higher wages in the next 12 months. Further, BoE Chief Economist Huw Pill said, “Betting too heavily on a Bank of England rate cut at its June rate meeting would be a bad idea.”

AUDUSD and NZDUSD hold lower grounds due to their trading ties with China and amid unimpressive mid-tier data from Australia and New Zealand. Moving on, USDJPY also lacks upside momentum as Japan’s key member of the House of Representatives Kato mentioned that it's natural that monetary policy will revert to positive interest rates. Further, the cautious mood ahead of Japan’s Q1 2024 GDP and firmer yields, as well as the indecision about the BoJ’s next move, challenge the USDJPY traders.

  • Strong buy: USDCAD, USDJPY, US Dollar
  • Strong sell: AUDUSD, NZDUSD, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

A likely slower start to the key week…

Looking ahead, a slew of central bank speakers from the US and Europe will entertain the momentum traders but a light calendar could restrict the market moves. Also likely to challenge the trading sentiment could be the pre-data anxiety, which in turn allows the risk-safe assets to extend the previous week’s rebound. With this, the US Dollar may grind higher and the same could challenge upside moves of the Gold, EURUSD and GBPUSD, as well as exert downside pressure on the Oil prices.

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