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Crude Oil Prices Find Reprieve as the US Dollar Wobbles Before Jackson Hole. Where To From Here?

Crude Oil Prices Find Reprieve as the US Dollar Wobbles Before Jackson Hole. Where To From Here?

Daniel McCarthy, Strategist

Crude Oil, US Dollar, AUD/USD, AUD/JPY, EUR/NOK, Jackson Hole - Talking Points

  • Crude oil prices find support with USD softening after Fed’s Kaplan spoke
  • APEC equities move higher, joined by commodities and associated currencies
  • All eyes on Jackson Hole from Thursday.Will USD resume its uptrend?

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The US Dollar pared back some of the gains of last week as risk assets found some support in Asia today. On Friday, Fed taper plan expectations were wound back after a normally hawkish Dallas Fed President Kaplan opined that he may need to change his view. He cited the uncertainty around the Covid-19 Delta variant for changing his tune. Although he is currently a non-voting member of the FOMC Board, he does sit in on the discussion for the decision on when to taper. The Jackson Hole symposium that starts on Thursday is where the markets are focussed and any further comments from FOMC members is likely to impact prices.

APAC equities continued on from a positive finish to Wall Street on Friday, rallying strongly, along with commodities. Crude oil is a stand-out beneficiary of the risk on sentiment but trades well below the high seen in early July. With WTI futures rallying, USD/NOK and EUR/NOK went lower due to Norwegian oil export capacity. Similarly, other commodity-linked currencies – AUD, CAD and NZD – had a positive day but remain vulnerable should the USD resume strengthening. Slight JPY weakening saw AUD/JPY as the biggest gainer among the major currency crosses despite a weak Australian PMI print.

In the near term, the market will be focused on European PMI numbers, before European consumer confidence and US existing homes sales data.

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Crude Oil Technical Analysis

The downtrend for crude oil prices remains intact despite today’s rally. If USD resumes strengthening, this may see support levels tested. The next downside barrier for CL futures comes in at the 200-day moving average, currently at US$60.31 and then at the March low of US$57.25.

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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