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US AM Digest: Oil Prices Retreat Ahead of President Trump’s Iran Nuclear Deal Announcement

US AM Digest: Oil Prices Retreat Ahead of President Trump’s Iran Nuclear Deal Announcement

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US Market Snapshot via IG: DJIA -0.1%, Nasdaq 100 -0.2%, S&P 500 -0.2%

Major Headlines

  • Chinese Trade Balance returns to a surplus in April
  • Fed’s Powell says the market is reasonably well aligned with the Fed dot plot.
  • UK Halifax House Prices see largest monthly decline in nearly 8years
  • Oil Prices pull back from 3 and half year highs ahead of President Trump’s announcement at 18:00GMT

USD: No stopping the bullish USD momentum which has yet again posted fresh 2018 highs and made a breach above the 93.00 handle. The greenback looks intent on making a move towards the December high situated at 94.22 with only 93.55 possibly offering some slight resistance in the near-term, which marks the 76.4% retracement of the 95.15 to 88.25 (October to February) fall.

EUR: The broader USD buying has attributed to the additional selling in the Euro, which has made a convincing move below 1.1900 with 1.1800 set to be tested. Latest CFTC data suggests that Euro longs could continue to bail, subsequently placing further pressure on the pair in the short-term. EURUSD failing to find any reprieve from the better than expected German Trade Balance and Industrial Production figures. Main risk event for the Euro will be Thursday’s CPI report, while comments from President Draghi at the end of the week will also likely garner attention.

GBP: If the Bank of England needed another reason why now may not be the most appropriate time to raise rates, today’s Halifax UK House Price data provided it. The report noted that house prices saw their largely monthly decline since 2010, which alongside the USD strength has weighed on the Pound this morning. However, all eyes will be on the Bank of England’s Quarterly Inflation Report where GBP bulls will be hoping for a ‘hawkish hold’.

AUD: The Australian Dollar is notably weaker this morning following a rather lacklustre retail sales data in the Asian session, AUD weakness also taking its cue from the softer risk appetite led by lower oil prices. As such, the spot rate has made a firm break through 0.7500, buying interest seen at the low 0.74s.

Oil: All eyes on the oil market today as President Trump will announce his decision on the Iranian Nuclear Deal. A vocal critic of the agreement it is likely that President Trump will not certify the deal, however the focus will on whether the US will impose new sanctions on Iran that would curb crude oil exports. In the run up to the announcement, WTI crude futures have continued to pull back from 3 and half year highs.

DailyFX Economic Calendar: Tuesday, May 8, 2018 – North American Releases

DailyFX Webinar Calendar: Tuesday, May 8, 2018

IG Client Sentiment Index: Oil Chart of the Day

Oil - US Crude: Data shows 41.0% of traders are net-long with the ratio of traders short to long at 1.44 to 1. In fact, traders have remained net-short since Apr 09 when Oil - US Crude traded near 6194.2; price has moved 13.1% higher since then. The number of traders net-long is 11.2% higher than yesterday and 4.2% higher from last week, while the number of traders net-short is 2.6% lower than yesterday and 7.0% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed Oil - US Crude trading bias.

Five Things Traders are Reading

  1. Mixed Messages From Market Sentiment Indicators as USD Strength Persistsby Martin Essex, MSTA, Analyst and Editor.
  2. Trading Outlook – Gold Price, Crude Oil, DAX, FTSE, Dow & More” by Paul Robinson, Market Analyst
  3. Bearish EURUSD Outlook as Correction Looks to Continue” by Justin McQueen, Market Analyst
  4. EURUSD Continues to Break Lower; US CPI Looms” by Nick Cawley, Market Analyst
  5. DAX Charts: Short-term Price Action May Be Significant for Longer-term” by Paul Robinson, Market Analyst

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--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Follow Justin on Twitter @JMcQueenFX

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