Crude Oil pares biggest daily jump in five weeks as US Dollar rebound tests commodity bulls

Markets maintain the latest pattern of sluggish moves during Thursday, as well as early Friday. The same allowed the US Dollar bulls to take a breather after tracing firmer yields the previous day. Even so, the US Dollar Index (DXY) remains on the way to posting a consecutive fourth weekly gain, which in turn prods the commodities and Antipodeans despite their latest run-up.

Even so, EURUSD and GBPUSD eye to snap a three-week losing streak while extending the mid-week rebound from a three-month low. Further, AUDUSD remains pressured on a weekly basis while NZDUSD prints the first weekly gains, so far, in six.

That said, USDJPY stays firmer at a 10-week high whereas the USDCAD challenges the five-week uptrend ahead of the key Canada employment report. It’s worth observing that a stellar rebound in the crude oil price, Canada’s main export, allowed the Loonie pair to welcome bears.

Gold prices, however, remain depressed amid economic woes surrounding the biggest customer China and the US Dollar’s strength due to the increasing odds of witnessing a delay in the Fed rate cuts.

Elsewhere, equities edged higher while the BTCUSD braces for the biggest weekly gain of 2024 and the ETHUSD also remains firmer as optimist at the crypto market escalates.

Following are the latest moves of the key assets:

• Brent oil prints mild losses at a one-week high, paring the biggest daily gains in five weeks around $811.80.
• Gold price seesaws around $2,033 while fading the previous day’s corrective bounce.
• USD Index stays defensive above 104.00 while bracing for the fourth weekly gains.
• Wall Street closed with minor gains but the Asia-Pacific stocks edged higher. That said, shares in Europe and the UK print mild losses during the initial hour of trading.
• BTCUSD refreshes the monthly high near $46,400 before easing to $46,300 by the press time while ETHUSD rises 1.5% intraday to near $2,450 as we write.

Jittery markets prevail…

Although the traders are placing nearly 50% bets on the European Central Bank’s (ECB) rate cut in April, ECB Governing Council member Pierre Wunsch said, “There is value in waiting to get more comforting wage data,” for the same action. This allowed the Euro (EUR) to remain firmer despite the US Dollar’s recovery. Further, ECB’s Chief Economist Philip Lane also cited the need to be further along in the disinflation for confirming the rate cuts. On the same line, ECB policymaker Robert Holzmann stated that there is a certain chance that the ECB will not cut rates this year.

On the other hand, the US Dollar cheered upbeat comments from the Federal Reserve (Fed) officials and softer prints of the US Jobless Claims while tracing the firmer Treasury bond yields.

Richmond Fed President Thomas Barkin said that he is cautious about the economic data around the turn of the year that can deceive. The policymaker also added that the Fed can take time on decision to cut rates. Further, Boston Fed President Susan Collins said she supports the median forecasts of the recent FOMC dot plot suggesting the 75 bps cut in 2024.

Not only the Fed officials but US Treasury Secretary Janet Yellen also appeared optimistic while ruling out fears from commercial real estate and suggesting a somewhat decline in the interest rates.

It should be noted that the cautious mood ahead of today’s US CPI revisions seems to challenge the US Dollar bulls, especially when Fed Chair Jerome Powell mentioned the same for the first time in his latest speech. The policymaker hoped to see confirmation of the inflation progress that favored the latest rate cut talks. However, any surprises can’t be ruled out and the same could either push back the rate cut options or bolster them.

Moving on, the International Monetary Fund (IMF) advised the Bank of Japan (BoJ) to consider ending its Yield Curve Control (YCC) and massive asset purchases now. The same challenged the USDJPY bulls amid firmer yields. However, BoJ Governor Kazuo Ueda defends the JPY sellers, favoring the USDJPY pair’s upside, while saying that chances are high of accommodative conditions to stay.

Furthermore, Bank of England (BoE) policymakers, namely Jonathan Haskel and Catherine Mann, advocated for a steady monetary policy avoiding any rate change while waiting for more clues on inflation. The same joined the US Dollar recovery to prod the GBPUSD pair’s two-day winning streak before picking up bids today.

NZDUSD rose the most among the G10 currency pairs as the odds of witnessing the Reserve Bank of New Zealand’s (RBNZ) rate hike in February bolstered. The upside momentum also took clues from hopes of China stimulus, which in turn helped the AUDUSD pair to edge higher even if Reserve Bank of Australia (RBA) Governor Guy Bullock portrayed inflation woes and teased rate cuts if consumption slows quicker than expected.

On a different page, the geopolitical tensions are escalating of late and put a floor under the US Dollar. That said, US President Joe Biden signaled levying import restrictions on Chinese cars whereas Russian President Vladimir Putin showed interest in ending the war if Ukraine surrenders, which in turn suggests a continuation of the global tensions. Furthermore, the Red Sea turmoil also remains on the table as the West and the East keep jostling to free the world’s busiest cargo route.

Apart from the rising geopolitical tensions that suggest a supply crunch, the International Energy Agency’s (IEA) forecasts of higher energy demand in 2024, led by an increase in India’s Oil consumption, favored the Crude Oil buyers to post the biggest daily jump in five weeks. It’s worth observing, however, that the black gold prints mild losses so far during early Friday as traders seek more clues to defend the energy bulls, especially amid the firmer US Dollar.

That said, Gold Price stays dicey as mixed clues about China join bearish technical signals and firmer US Dollar to challenge the XAUUSD bulls. However, the metal sellers remain cautious amid an increase in physical and central bank buying.

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

Canada employment data and nothing else…

The economic calendar is likely to remain thin for the rest of Friday, with only the monthly Canadian employment report. However, a slight risk-on mood could be witnessed during the late hours as China enters the Lunar New Year holidays and may allow optimists to take one last straw. Even so, hawkish comments from the central bankers and geopolitical woes might test the upside of the riskier assets.

May the trading luck be with you!