Oil Edges Up as Traders Mull Middle East Situation

Warren Takunda

Commodity

Energy

Traders' Opinions

Summary:

Oil prices rose to $73 amid Middle East tensions, but concerns over global demand and recent losses linger. Technical analysis hints at a temporary uptick, but resistance at $73.73 looms. Investors should watch geopolitical developments closely amidst ongoing uncertainty.

BUY WTI

Close Time

CLOSED

73.034

Entry Price

75.000

71.000

73.118 +0.935 +1.30%

117.9

Pips

Profit

71.000

74.213

Exit Price

73.034

Entry Price

75.000

WTI crude futures edged higher to around $73 per barrel on Tuesday, extending gains from the previous session as investors closely monitored escalating tensions in the Middle East. Concerns about potential disruptions to oil supply from the region have gripped markets following a series of US strikes on Iran-backed militias over the weekend. However, US officials have reiterated that the country is not seeking a broader conflict in the region.

Last week's heavy losses in oil prices, plunging more than 7%, were attributed to progress in ceasefire negotiations between Israel and Hamas, which significantly diminished supply risks in the Middle East. Furthermore, fading expectations of immediate interest rate cuts from the US Federal Reserve and persistent concerns surrounding China’s economic recovery have added pressure on the global demand outlook.

Technical Analysis

Crude oil prices have shown signs of recovery, surpassing the $72.50 level and settling above it, aiming towards intraday gains targeting the 73.73 level. However, this uptick may be temporary, with the bearish trend expected to dominate the intraday and short-term basis as long as the 73.73 level remains intact.

Breaking below the $72.00 level could halt the expected rise and push prices lower towards the $70.00 barrier, marking a significant negative milestone. The anticipated trading range for today is expected to oscillate between the support at $71.50 and resistance at $75.00.Currently looking for a place a conter trend trade targeting the resistance at $75

TRADE RECOMMENDATION

BUY WTI

ENTRY PRICE : 73.00

STOP LOSS : 71.00

TAKE PROFIT : 75.00

Risk Warnings and Disclaimers

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Eva Chen

Commodity

Economic

Summary:

The economic momentum improved and Powell's speech hit the expectation of interest rate cuts, which gradually dissipated the previous bullish factors. It is expected that crude oil prices will continue to fluctuate and trade. It is recommended to focus on the latest progress of the Fed's interest rate cuts and the drastic changes in geopolitical conflicts.

BUY WTI

EXP

EXPIRED

71.800

Entry Price

75.800

67.800

73.118 +0.935 +1.30%

Pips

EXPIRED

67.800

78.457

Exit Price

71.800

Entry Price

75.800

Fundamentals

Last Wednesday, the Federal Reserve's interest rate meeting and Powell's speech hit the market's interest rate cut expectation. Powell bluntly said that it was almost impossible to cut interest rates in March, and the market's interest rate cut expectation was frustrated.

Last Friday, the results of the NFP report in January in the U.S. were far stronger than expected, reaching 353,000, about twice the actual number of people expected; Last month's data was revised, and the unexpected employment data may prove the rationality of Powell's crushing interest rate cut in March, which also points out that the Fed may remain hawkish for a longer period, indicating that the borrowing cost will remain high for longer as well. In turn, this may lead to the weakening of business and consumer activities, thus reducing the demand for fuel and energy commodities and leading to the selling of crude oil.

Admittedly, as extreme weather fades, U.S. crude oil production picks up and 70% of overall production has returned, with supply having upward momentum. At the same time, most of the OPEC+ countries involved in voluntary production cuts in Q1 have completed their tasks, and the overall OPEC meeting on February 1 was in line with expectations, with the production cut factor having a limited effect on crude oil prices, posing additional pressure on the upside of crude oil prices.

In addition, there may be signs of easing the geopolitical conflict, revealing the possibility of reaching an armistice agreement between Palestine and Israel, and the weakening of the support of the geopolitical crisis for crude oil prices are all important factors driving the decline of crude oil.

Looking ahead, crude oil prices are expected to remain volatile and weak as the geopolitical tensions that supported the rise in crude oil prices give way to a pessimistic fundamental outlook, and the turn in the technical charts remains unimproved.

Bulls Should Calm Down as There Is Still Downward Death Cross in the 1D Timeframe_1

Technical Analysis

WTI formed an ascending channel in the 4H timeframe with higher lows and higher highs, which is a sign that the price is about to move higher.

If so, crude oil may return to the upward target marked by the Fibonacci Extension tool. The level of 38.2% is close to US$75.18, and then the level of 50% is close to the middle channel area, which is US$76.23.

Stronger bullish momentum could take crude oil prices to the 61.8% Fibonacci level at US$77.28 or even the 76.4% level near the US$78.58 swing high. The full upside target is US$80.67.

The 100 SMA lies above the 200 SMA, indicating that the path of least resistance is to the upside, or that support is more likely to hold rather than be continuously broken. However, the price is trading below both moving SMAs, so these SMAs may hold dynamic resistance in the upward path.

A break below the channel support level could trigger a reversal of the uptrend, but the oscillators are also suggesting that the bulls could return soon. Stochastic has also reached the oversold zone, reflecting the exhaustion of the bears; therefore, a move higher would confirm that the bulls are back. In addition, the Relative Strength Index has also fallen into oversold territory.

Overall, with more indicators as well as structures pointing bullish, it is expected that this round of downtrend pattern opened since US$79.00 is about to bottom out; but since the larger 1D structure still has a downward death cross, it is expected that there is still some room to fall; however, with an intraday close of white body, it is expected that the reversal pattern will be officially opened. It is recommended to set the foundation.

Trading Recommendations

Trading direction: Long

Entry price: 71.80

Target price: 75.80

Stop loss: 67.80

Deadline: 2024-02-19 23:55:00

Support: 70.58, 69.40, 67.94

Resistance: 72.94, 74.42, 75.39

Risk Warnings and Disclaimers

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Eva Chen

Forex

Economic

Summary:

The European Central Bank (ECB)'s caution about cutting interest rates is justified by rising price indices, reflecting higher input and output prices in the services sector. Such inflationary pressures complicate the ECB's decision-making, especially given that the latest GDP data for Q4 of 2023 show that the eurozone has barely avoided a technical recession.

BUY EURUSD

Close Time

CLOSED

1.07428

Entry Price

1.09500

1.06300

1.03453 +0.00391 +0.38%

25.9

Pips

Profit

1.06300

1.07687

Exit Price

1.07428

Entry Price

1.09500

Fundamentals

The eurozone's final services Purchasing Managers' Index (PMI) came in at 48.4 in January, slightly down from 48.8 in December, while the final composite PMI came in at 47.9, up from 47.6 in the previous month and at a six-month high.

These data reveal a challenge to the traditional notion of a "North-South divide". At 51.5 and 50.7 respectively, the composite PMI for Spain and Italy were better than those of Germany (47.0) and France (44.6) in the North.

Cyrus de la Rubia, chief economist at Commerzbank Hamburg, said that labor shortages are a widespread reality across the eurozone, as evidenced by significant wage increases in the four largest eurozone countries. The impact of this phenomenon is underscored by the inflation of input prices within these economies. It is worth noting the apparent reluctance of enterprises to lay off workers, a trend that can be observed even in Germany and France, where conditions in the service sector remain poor. Business expectations have improved, boding well for future improvements. However, given the seventh consecutive month of declining new business, a near-term recovery is unlikely.

The ECB's hesitancy to cut interest rates has become clearer given the spike in the PMI price index. The ECB is reluctant to ease monetary policy as both input and output prices in the services sector are rising. However, the ECB is in a tricky position. The latest release of the official GDP for Q4 of 2023 suggests that the eurozone economy has just barely avoided a technical recession.

MARKET WATCH: The labor market in the eurozone is showing real tightness, which could be good for a pickup in consumption in the region in the coming quarters, but it won't be such good news for the ECB. As wages continue to rise, the growth in unit labor costs is being pushed up to record levels, adding to underlying inflationary pressures. Labor pools appear to be small, which means wages could accelerate when economic activity picks up again. Unless companies are willing to take the financial hit by hiring more staff, inflationary pressures will continue, which is one reason the ECB will delay cutting rates until June.

The EURUSD is likely to remain within a relatively small range of 1.05-1.11 in the short term. The EURUSD has been fluctuating within this range lately, even though market expectations for ECB easing are slightly higher than those of the Federal Reserve and economic growth in the eurozone lags far behind that of the U.S. It would take a major change in expectations to actually make the foreign exchange market volatile.

Technical Analysis

The EURUSD made a sharp rise to the 1.1000 range in late December last year and has since reversed lower; the pullback is still in progress, thanks to the "head and shoulders" pattern still in play. Ideally, this is now an overlapping decline of a higher correction, and could even represent a second wave of higher retracements; so, it is advised to watch out for price stabilization, and perhaps the complex correction could be over once the price falls back to some decent support, in the 1.0700-1.0656 range.

Also, the divergence in the Relative Strength Index suggests that further bearish momentum may be losing momentum. At the same time, considering the bullish convergence of the 4-hour MACD, a rebound could be in the offing. However, the 1.0780 resistance level needs to be broken first to signal a short-term bottom.

On the other hand, a decisive break below 1.0725 would indicate that the overall uptrend from 1.0447 is complete and could further target the 1.0656 bottom.

From a broader perspective, the trend from 1.1274 is seen as a corrective pattern rising from 0.9534 (2022 low). The rise from 1.0447 is seen as the second wave of the trend. While a further rebound cannot be ruled out, the upside should be limited by 1.1274. Meanwhile, a sustained break below the 1.0656 support level would indicate that the third round has begun and the price could fall to 1.0447 or lower. It is recommended to buy the dips in the short term as the downside is limited.

Trading Recommendations

Trading direction: Long

Entry price: 1.0700

Target price: 1.0950

Stop loss: 1.0630

Deadline: 2024-02-19 23:55:00

Support: 1.0725, 1.0700, 1.0656

Resistance: 1.0780, 1.0897, 1.0933

Risk Warnings and Disclaimers

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Warren Takunda

Central Bank

Traders' Opinions

Economic

Summary:

The Australian dollar dropped 1% against the US dollar due to robust US jobs data, reducing expectations of a March rate cut. Federal Reserve Chair Jerome Powell's comments added to this sentiment. The Reserve Bank of Australia's upcoming meeting occurs amidst economic cooling signs. Technical analysis suggests a bearish outlook for the AUD/USD pair.

SELL AUDUSD

Close Time

CLOSED

0.65252

Entry Price

0.63000

0.65500

0.62886 +0.00115 +0.18%

26.4

Pips

Profit

0.63000

0.64988

Exit Price

0.65252

Entry Price

0.65500

The Australian dollar (AUD) took a significant hit, dropping nearly 1% against the US dollar (USD) in response to the latest US nonfarm payrolls data. As of the North American session close, the AUD/USD pair was trading at 0.6644, marking a 0.40% decline from earlier levels.

The start of 2024 has been favorable for the US dollar, which saw notable gains against several major currencies throughout January. Particularly, the Australian dollar suffered a 3.59% decrease against the USD during the month. This downward trend continued as the Aussie dollar fell to 0.6508, its lowest point since November 20.

US Nonfarm Payrolls Report Surprises Markets

The conclusion of the week brought forth significant market volatility, driven by the release of the US nonfarm payroll report. The report exceeded expectations, with a robust addition of 353,000 jobs in January, surpassing the estimated 180,000. Moreover, the December figures were revised upward to 333,000, up from the initial 216,000. This unexpected surge in job creation bolstered the US dollar against major currencies and diminished prospects for a rate cut in March. The probability of a rate cut next month plummeted to 19%, down from 38% just a day prior, according to the CME FedWatch tool.

Federal Reserve Chair Jerome Powell further dampened expectations for a March rate cut during this week's meeting, stating that such a move was unlikely, albeit not entirely ruling it out. Market participants are now eyeing the May meeting, with a 62% likelihood of a quarter-point cut, according to CME's FedWatch.

RBA Meeting Amid Economic Cooling Signs

The Reserve Bank of Australia (RBA) is set to convene on February 6 against a backdrop of economic cooling indicators. Inflation moderated to 4.1% year-on-year in the fourth quarter, down from 5.4% in Q3, while December witnessed a sharp decline of 2.7% month-on-month in retail sales. The RBA is widely expected to maintain its stance next week and may consider rate cuts later in the year.

AUD/USD Technical Analysis

Technical analysis reveals a bearish sentiment for the AUD/USD pair, with the formation of a head and shoulders pattern indicating a potential reversal. The failure to sustain levels above 0.6570 has led to a downward trajectory, with the price nearing the 0.6500 support level. Further downside movement is anticipated unless the pair manages to breach and hold above 0.6570. The projected trading range for the day is between 0.6440 support and 0.6540 resistance.

We should waait a break and retest at the 0.65252 level before considering short positions on the AUD/USD pair, targeting a return to the 4-hour key level at 0.6300.

TRADE RECOMMENDATION

SELL AUDUSD

ENTRY PRICE : 0.65252

STOP LOSS : 0.65500

TAKE PROFIT : 0.6300

Risk Warnings and Disclaimers

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Peterson

Commodity

Summary:

The oscillation range during the day will be 71.5-74.5, and investors are advised to buy low and sell high.

BUY WTI

Close Time

CLOSED

71.500

Entry Price

74.500

71.000

73.118 +0.935 +1.30%

118.4

Pips

Profit

71.000

72.684

Exit Price

71.500

Entry Price

74.500

Fundamentals

During the Asian session on Monday (February 5), WTI crude oil fluctuated in a narrow range and is currently trading around 72.5 dollars per barrel.

Last Friday, oil prices fell sharply. They fluctuated very narrowly in the Asian market, with a trend of stabilizing. However, after the non-farm payroll data, the dollar rebounded sharply, and oil prices fell in the US market, marking the third consecutive decline in the week, and the magnitude was not small. Especially in the early morning, when the geopolitical risks between the United States and Iran, a major oil producer, intensified, oil prices still did not improve. This also showed that the market sentiment was weak, mainly because the sharp rise in oil prices in the early stage was due to the impact of the cold wave in the US on production, but the impact is not sustainable. Now that the marginal fundamentals have improved significantly, we can see a rapid recovery from the EIA production data, which also indicates that the basis for the previous sharp rise has disappeared. Oil prices therefore will go back to the previous levels. At present, oil prices have fallen below the level before the cold wave, but they are still oscillating in a wide range of 70-75, also in the upward box in the chart below. As the oil price is at the lower edge of the box, and the bearish factor is also digested in advance, it is no longer suitable or recommended for traders to go short. Instead, investors should be patient and wait for the opportunity to go long.

At the moment, the impact of extreme weather and geopolitical factors is limited, and the rising momentum is also limited. Unless geopolitical factors reappear as the fundamental factors that caused the supply tightness, oil prices will have a chance to break through the upper edge of the box. However, oil prices have all reversed their gains and fallen back to the lower edge of the box after last week's decline. The uncertainty of geopolitical risks is still high, which can always disturb the sentiment of the oil market and play a certain supporting role in oil prices. Next, we need to pay attention to the OPEC+ further production cut plan in March, but it is difficult to continue to increase the production cut. After all, idle capacity is also a big problem, and the production cut is a drop in the bucket in shoring up prices. Any fundamental improvement in oil prices will depend on whether demand can improve, which can be expected in the context of macro easing.

News: US President Joseph Biden announced On the 2nd local time that the US military began a multi-level "retaliatory operation", carrying out airstrikes on more than 85 targets in Iraq and Syria. All of the targets were the Iranian Islamic Revolutionary Guard Corps' Quds Force and its affiliated militia groups, as a retaliation for the attack on the US military base in Jordan a few days ago.

There is no important data today. Traders need to pay attention to the weekly crude oil inventory and production data.

Technical Analysis

Oil prices fluctuated in a narrow range in the Asian session yesterday. In the US market, as the dollar rebounded sharply, oil prices fell as low as 71.8. In the end, crude oil closed with a long bear candle, marking the third decline in a week. At present, oil prices have fallen below the MA60. That is really weak. However, the oil price is still at the lower edge of the early running box currently, testing the support. If there is no new big bearish factor, oil prices will be less likely to fall sharply. Instead, with traction, they are expected to be pulled back into the box.

In the 1-hour chart, the bearish momentum has been fully released after three days of decline, and the MACD indicator has entered the deep oversold area, with the appearance of a golden cross. We may expect an intraday rebound, and the strength of the rebound depends on whether the daily chart can close higher. As a Doji star appeared at the bottom in the 4-hour timeframe, the bearish momentum of MACD was fully released, and there was a need for oil prices to rebound. Due to the 3 consecutive bear candles in the daily chart, there are no conditions for a sharp rebound. However, it is not recommended that traders go short at a low level but try to focus on entering long positions at lows at the hourly level. During the day, investors can buy low and sell high in the range of 71.5-74.5. Oil Prices Fall Under Pressure as the Dollar Rebounds Sharply_1

Oil Prices Fall Under Pressure as the Dollar Rebounds Sharply_1

Trading Recommendations

Trading Direction: Long

Entry Price: 71.500

Target Price: 74.000

Stop Loss: 71.000

Support: 71.500/70.500

Resistance: 73.500/74.700

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Traders' Opinions

Central Bank

Summary:

The US dollar strengthened to its highest level in eight weeks, surpassing the 104 mark, bolstered by robust job creation data for January and a hawkish stance from Federal Reserve Chair Jerome Powell.

BUY USDX

Close Time

CLOSED

103.800

Entry Price

104.600

103.400

107.890 -0.280 -0.26%

80.0

Pips

Profit

103.400

104.601

Exit Price

103.800

Entry Price

104.600

The greenback surged to its loftiest levels in eight weeks, breaching the 104 mark on Monday, propelled by robust economic indicators and a resolute stance from the Federal Reserve, which together dimmed prospects for interest rate cuts. The dollar index, which measures the value of the dollar against a basket of major currencies, painted a bullish picture as it soared to new heights, fueled by an array of factors that buoyed investor sentiment towards the US currency.

Strong Jobs Growth Propels Dollar to 8-Week Highs, Rate Cut Bets Fade_1

Last Friday's employment report delivered a hefty surprise to markets, revealing a staggering addition of 353,000 jobs in January, outstripping the already impressive figure from December and significantly outpacing consensus estimates. This surge in job creation not only underscored the resilience of the US economy but also fueled expectations for sustained growth momentum in the coming months.

In a rare television appearance on CBS's "60 Minutes" aired over the weekend, Federal Reserve Chair Jerome Powell struck a decidedly hawkish tone, signaling the central bank's cautious approach towards monetary policy adjustments. Powell emphasized the Fed's commitment to maintaining a patient stance, citing the need for further evidence that inflation is on a sustained trajectory towards the 2% target before considering any rate cuts. His remarks quashed lingering hopes of an imminent monetary easing cycle, prompting a swift recalibration of market expectations.

Market participants swiftly adjusted their rate cut projections in the wake of Powell's comments, slashing the likelihood of a March rate cut to a mere 20%. Furthermore, the collective forecast for total easing throughout the year dipped to approximately 137 basis points, down from the 150 basis points anticipated at the close of last year. This dovish pivot underscores the prevailing sentiment that any future rate adjustments will be measured and gradual, in stark contrast to the aggressive easing priced in by markets previously.

Technical Outlook

From a technical standpoint, the Dollar Index (DXY) has displayed remarkable strength, consolidating its gains above a critical resistance level on the 4-hour chart. The breach of this resistance has transformed it into a robust support level, laying the groundwork for a sustained uptrend towards the 104.27 mark. Barring a significant reversal below the support range, the path appears clear for further upside potential, with momentum indicators suggesting a continuation of the bullish bias.

TRADE RECOMMENDATION

BUY DXY

ENTRY PRICE : 103.800

STOP LOSS : 103.400

TAKE PROFIT : 104.600

Risk Warnings and Disclaimers

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Peterson

Commodity

Summary:

Today's oscillations will be in the range of $2015-$2045, in which investors can buy low and sell high.

BUY XAUUSD

Close Time

CLOSED

2015.00

Entry Price

2045.00

2010.00

2905.97 -2.06 -0.07%

126.5

Pips

Profit

2010.00

2027.65

Exit Price

2015.00

Entry Price

2045.00

Fundamentals

During Monday's (Feb. 5th) Asian session, spot gold oscillated slightly, and it is now trading at $2030.

The U.S. January nonfarm payrolls data published last Friday greatly exceeded expectations. Thus traders predicted that the Fed would postpone its first rate cut. After the release of the data, the gold price plummeted by 30 dollars from $2058 to $2028 before stabilizing. Last Friday, we suggested that investors could seize opportunities to sell high when the data was announced, which did yield good returns. Currently, the market's expectations for a March rate cut by the Fed have declined to the lowest point, but there are still no increased bets on a May cut. The gold price therefore will likely consolidate for a while. Against the background of interest rate cuts, the downside will be limited, and gold is more likely to fluctuate before moving upward. We can still wait for a deep drop and size that opportunity to go long. For conservative investors, shorting the gold/silver ratio is also a good choice.

Gold oscillated narrowly during the last trading session. In the U.S. session, gold plummeted after the release of the data and fell as low as $2033. Then, it descended again after being resisted by $2040, dropping to $2028 before getting stable. Our strategy to trade between $2035 to $2075 underestimated the gold's depreciation, and finally we suffered a loss of 5 dollars by going long at $2035.

Data: U.S. nonfarm payrolls increased by 353,000 in January, the largest gain since January 2023, which exceeded the expected 180,000 and the previous 216,000. In addition, the unemployment rate was 3.7% in January, unchanged from the previous month and lower than the expected 3.8%.

Today's focus: There are not many important economic data due this week, and investors will mainly trade according to the existing data.

Technical Analysis

Last Friday, gold oscillated slightly in the Asian session before significant oscillations due to the release of the data. When the nonfarm payrolls data exceeded expectations, gold plunged by 30 dollars, making it harder to buy the dips. Later, gold declined below the support between $2035 and $2040, trying to test the range of $2015 - $2020. Finally, it rebounded slightly after getting stable at $2028 thanks to the take-profit orders triggered. As the momentum was weak, gold depreciated again to the trend line (shown below) and tested the support. Gold is not likely to plunge again with traction. If it declines to the range between $2015 and $2020, aggressive investors can go long with small positions.

Technically, under the effect of data, gold retraced continuously last Thursday and Friday and turned weak. In the short term, gold is not possible to turn better, but the downside is also limited. With little important data due this week, gold will remain relatively stable this week. It may extend the weak pattern at the beginning of this week and will test the support between $2015 and $2020. After the sentiment is released, gold will get stable in the second half of this week. However, the upside will also be limited, and gold is expected to oscillate between $2015 and $2050. In the 1H chart, the accumulated risks at high are released after last Friday, and MACD enters a serious oversold area despite the death cross. Thus, it is more difficult for gold to decline further, and gold should rebound soon. If gold plunged, it would be a great chance to go long. The trading range will be between $2015 and $2045 today, where aggressive investors should buy low and sell high. Gold Plunged Due to Unexpected Increase in Nonfarm Payrolls_1

Gold Plunged Due to Unexpected Increase in Nonfarm Payrolls_1

Trading Recommendations

Trading direction: Long

Entry price: 2015

Target price: 2045

Stop loss: 2010

Support: 2020.000/2000.000

Resistance: 2045.000/2065.000

Risk Warnings and Disclaimers

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Oil Edges Up as Traders Mull Middle East Situation

Bulls Should Calm Down as There Is Still Downward Death Cross in the 1D Timeframe

Fundamentals

Technical Analysis

Trading Recommendations

Buy the Dips as Downside Is Limited

Fundamentals

Technical Analysis

Trading Recommendations

Aussie Tumbles Following Robust US Nonfarm Payrolls Report

Oil Prices Fall Under Pressure as the Dollar Rebounds Sharply

Fundamentals

Technical Analysis

Trading Recommendations

Strong Jobs Growth Propels Dollar to 8-Week Highs, Rate Cut Bets Fade

Gold Plunged Due to Unexpected Increase in Nonfarm Payrolls

Fundamentals

Technical Analysis

Trading Recommendations

Risk Disclosure