Crude Oil stays firmer amid geopolitical woes, softer US Dollar

Markets turn cautiously optimistic while preparing for this week’s top-tier data/events. The consolidation allowed US Dollar bulls to take a breather while helping commodities and Antipodeans to reverse the week-start losses. Apart from the pre-data positioning, China’s stimulus also helps the positive sentiment even as tensions in the Middle East and the Red Sea challenge the optimists. Additionally probing the optimists are the reducing bets on the Fed’s early interest rate cuts.

That said, the US Dollar Index (DXY) dropped to a one-week low while posting the biggest intraday losses in January, which in turn joined a pullback in the yields and the Bank of Japan’s (BoJ) inaction to weigh on the USDJPY. On the same line, China news and mildly positive risk appetite favored AUDUSD and NZDUSD whereas the ECB officials’ rejection of early rate cuts propels EURUSD. That said, GBPUSD ignores the UK pessimism while USDCAD struggles to cheer firmer Oil prices amid the downbeat concerns about Canada.

Elsewhere, Gold Price again recovers from the 50-SMA support whereas crude oil grinds higher following the biggest daily jump in a week.

Talking about the cryptos, BTCUSD licks its wounds at a seven-week low whereas ETHUSD also recovers from the lowest level in a fortnight amid chatters that miners bolstered their reserves of Bitcoin.

Following are the latest moves of the key assets:

• Brent oil grinds at the weekly high, up 0.50% intraday near $80.30 by the press time.
• Gold price reverses the week-start losses near $2,030, up 0.45% intraday at the latest.
• USD Index drops to the lowest level in more than a week as sellers attack 103.00 as we write.
• Wall Street again closed in the green and the Asia-Pacific stocks edged higher, despite a thin trading presence. That said, equities in the UK and Europe appear mildly bid during the initial hour.
• BTCUSD and ETHUSD both print mild gains while bouncing off multi-day lows to $39,800 and $2,335 respectively.

Traders prepare for big data amid mixed clues

After restarting the week on a positive footing, the US Dollar retreated amid the market’s positioning for the key data. Also, market players rethink the latest reduction in the bets supporting early rate cuts from the US Federal Reserve (Fed) and hence pare their USD longs.

On Monday, the US CB Leading Index for December improved to the 18-month high of -0.1% MoM versus the market expectations of -0.3% and the previous monthly release of -0.5%. Also allowing the Greenback’s gauge versus the six major currencies to remain firmer was the drastic fall in the market’s favor for the Fed rate cut in March per the CME’s FedWatch tool, from 76.9% a week earlier to 42.4% by the end of Monday.

Elsewhere, China’s measures to restrict favorable tariffs for Taiwan are extra burdens on the Oil Price, via the firmer US Dollar. However, the geopolitical tensions in the Red Sea and China’s readiness for a $278 billion stock rescue package helped the black gold to edge higher, especially when the equities after near a multi-year high.

Earlier in the day, the BoJ kept its monetary policy unchanged but a slightly hawkish tone of Governor Kazuo Ueda joined the broad pullback in the yields to weigh on the USDJPY price.

• 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 eyed for intraday moves…

Looking ahead, the US Richmond Fed Manufacturing Index for January will join the preliminary readings of Eurozone Consumer Confidence for January and the US Oil inventories from the industry player American Petroleum Institute (API) to entertain intraday traders. It’s worth noting, however, that geopolitical news and the Fed rate bets will carry much higher weight and will be crucial in determining the market moves. Overall, consolidation in the US Dollar ahead of this week’s US PMI and Core PCE Price Index appears more likely and can favor the buyers of commodities and Antipodeans.

May the trading luck be with you!