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Crude oil settles lower in choppy trading session

 

Tuesday, September 27, 2022, 8.45am GMT

The news shaping the markets today

A man opened fire at his former school in central Russia, killing 15 people, including 11 children. Despite the ongoing tensions, the US dollar index traded lower this morning.


China’s industrial profits contracted by 2.1% year-over-year to 55.25 trillion yuan during the first eight months of the year, compared to a 1.1% decline in the prior period, exerting pressure on the CNY/USD forex pair.


South Korea’s Composite Consumer Sentiment increased by 2.6 points from the prior month to a reading of 91.4 in September, which sent the KRW/USD pair higher in forex trading this morning.


Argentina’s economic activity estimator climbed by 5.6% year-over-year in July, down from a 6.9% rise in the earlier month, exerting some pressure on the ARS/USD forex pair.


The Dallas Fed general business activity index slipped to -17.2 in September, from -12.9 in the earlier month, sending the Dow Jones index lower by more than 300 points on Monday.

 

What’s happening: Crude oil settled lower on Monday, ending a volatile trading session.

What happened: Oil prices tumbled to multi-month lows on Monday, with markets awaiting details on fresh sanctions on Russia.

Traders also shorted crude oil with the US dollar gaining further strength.

Why it matters: Crude oil climbed in early trading on Monday but pared all its gains and turned lower as the session progressed.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, surged to a two-decade high on Monday, sending oil lower. Commodity markets remained under pressure, as oil and other goods are priced in the US dollar and any appreciation in the currency makes them more expensive for foreign currency holders. The dollar index gained around 0.8% to settle at 114.10.

Disruption due to the ongoing Russia-Ukraine war also impacted market sentiment for oil. The European Union is set to impose a ban on crude imports from Russia by December 5, and oil products from the country by February 5. These sanctions would negatively impact Russia’s oil revenues and force one of the world’s biggest oil producers to look for alternate markets.

The G7 (Group of Seven nations) is also looking to impose a price cap on Russia’s exports.

Markets remained concerned about aggressive policy tightening by the central banks of several regions, which could dampen global economic growth, leading to a decline in the demand for energy. Earlier this month, the US Federal Reserve raised its interest rates by 75bps. Other major banks also announced rate hikes in a bid to combat rising inflation.

WTI crude for November delivery fell by $2.03, or 2.6%, to close at $76.71 on Monday, reaching its lowest level since January 6. Brent crude futures for November declined by $2.09 to settle at $84.06 per barrel, also notching its weakest level since January 14. Both crude oil contracts had shed around 5% on Friday.

In another energy trading, wholesale gasoline for October delivery came in unchanged at $2.38 a gallon, while October natural gas added 7 cents to $6.90 per 1,000 cubic feet on Monday.

What to watch: Traders await the OPEC+ (Organization of the Petroleum Exporting Countries and allies) meeting on October 5. The cartel had announced a modest supply cut earlier this month. Data released last week showed the OPEC+ failing to meet its target by 3.58 million bpd (barrels per day) in August.

The release of the API’s (American Petroleum Institute) data on crude oil stockpiles will also remain in focus today. US crude inventories had risen by 1.035 million barrels during the week ended September 16, after a gain of 6.035 million barrels in the earlier week.

The markets today

Bitcoin will be in focus today, after staging a recovery on Monday

Context: Bitcoin rose steadily through the session on Monday and breached the major $19,000 resistance level.

Details: Bitcoin started the week on a cautious note, hovering below the $19,000 mark, with traders remaining on the sidelines after the US Federal Reserve’s aggressive interest rate hike and hawkish comments.

The cryptocurrency had fallen to its long-term support level of $18,300 after the FOMC meeting on Wednesday last week.

Although trading over the weekend saw some support for Bitcoin, the crypto king fell as low as $18,696.47 during the session on Monday. Prices later rebounded, surpassing $19,000.

Ethereum also started the week on a lower note, continuing to trade below the $1,300 level and declining to an intraday low of $1,275.63 during the session. However, the world’s second most valuable crypto recovered later in the session, breaching the $1,300 mark.

What to watch: Traders will continue monitoring comments from Fed officials. The release of major economic reports would also provide some direction to Bitcoin prices.

Other Markets: European trading indices closed mostly lower on Monday, with the DAX 40, CAC 40 and STOXX Europe 600 down by 0.46%, 0.2248% and 0.42%, respectively, and the FTSE 100 higher by 0.03%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 0.9623 and 0.9639 Positive
USD/CAD – 1.3685 and 1.3706 Positive
Silver – 18.429 and 18.466 Positive
Copper – 3.2945 and 3.3025 Positive
Nikkei 225 – 26594.84 and 26671.84 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9636, 0.28%) Dow ($29,534, 0.65%) Brent ($83.11, 0.3%)
GBP/USD (1.0768, 0.75%) S&P500 ($3,696, 0.71%) WTI ($76.89, 0.2%)
USD/JPY (144.48, -0.18%) Nasdaq ($11,404, 0.78%) Gold ($1,637, 0.2%)

What else to watch today

Sweden’s balance of trade, the value of loans and producer price inflation, Eurozone’s loans to households, loans to non-financial corporations and money supply M3, France’s initial jobless claims and unemployed persons, Brazil’s IPCA-15 consumer price index, federal tax revenues and Central Bank of Brazil’s Copom meeting minutes, Mexico’s balance of trade and unemployment rate, US durable goods orders, Redbook index, S&P CoreLogic Case-Shiller 20-city home price index, FHFA house price index, new home sales and Dallas Fed services index, Nigeria’s interest rate decision, as well as Argentina’s retail sales.

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