Crude Oil recovers on geopolitical tensions and China optimism as 2024 begins

Market sentiment remains dicey as traders begin 2024 with a cautious mood. That said, geopolitical tension surrounding the Middle East joins mixed China data/events, as well as anxiety ahead of this week’s top-tier data/events to keep the market players on the edge after a long weekend.

Against this backdrop, the US Dollar defends the late 2023 rebound but the prices of gold and crude oil resist declining. That said, AUDUSD rises the most among the G10 currency pairs while EURUSD appears the least moved pair.

It should be noted that the equities in the Asia-Pacific region drift lower despite the dicey US stock futures.

BTCUSD rises to a fresh high since April 2022 despite record-high funding costs for long positions and optimism about the spot ETF approvals. On the same line, ETHUSD also rose toward the multi-month high marked last week as Ethereum supplies hit an all-time low.

Following are the latest moves of the key assets:

• Brent oil began 2024 with an upside gap, gaining 1.70% intraday to $78.50 by press time as it snaps three-day losing streak.
• Gold price also prints the first daily gains in three, up 0.60% intraday near $2,075 at the latest.
• USD Index struggles to keep recovery from the lowest level since late July, mildly bid near 101.45 as we write.
• Wall Street closed with mild losses and so did the Asia-Pacific stocks. Equities in the UK and Europe post minor gains during the initial hour.
• BTCUSD refreshes multi-month high around mid-$45,000s but ETHUSD appears less bullish near $2,380 as we write.

Firmer US Dollar fails to push back commodity buyers

The US Dollar’s corrective bounce fails to justify the market’s hopes of witnessing more clues that will support the market’s view for the Federal Reserve’s (Fed) rate cuts in 2024, which in turn underpins the firmer prints of commodities.

Apart from the dovish Fed concerns, the entry of an Iranian warship in the Red Sea joins the US readiness to attack Houthis to propel the Crude Oil price.

Elsewhere, China’s Caixin Manufacturing PMI for December came in 50.8 versus 50.7 prior and the market’s expectations of 50.4. However, the official PMIs from the Dragon Nation were downbeat for the said month and hence kept challenging the market sentiment in Asia.

Additionally, the traders flagged concerns about China President Xi Jinping’s optimistic New Year Speech to favor the commodities and Antipodeans. That said, China’s NBS Manufacturing PMI dropped to a five-month low of 49.0 versus the market expectations of 49.5 and the previous readings of 49.4 whereas the Non-Manufacturing PMI improved to 50.4 from 50.2, compared to the analysts’ estimations of 50.5.

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

PMIs eyed…

Moving on, the final readings of December PMIs for the US, the UK and the Eurozone might entertain the market players on Tuesday. However, major attention will be given to the trader’s reaction to the latest geopolitical tension and an increase in the odds favoring the Fed’s rate cut in January, as well as the market’s mood ahead of this week’s top-tier data/event. Among them, Wednesday’s FOMC Minutes, ADP Employment Change and Friday’s US Nonfarm Payrolls (NFP) will gain major attention.

May the trading luck be with you!