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Crude oil dips amid lockdown news

The news shaping the markets today

Ukraine’s forces claimed they had retaken a Kyiv suburb and an eastern town from Russia. Hope of easing tensions between the two countries sent the US dollar index slightly lower this morning.


Australia’s retail sales grew by 1.8% in February, following 1.6% growth in the previous month, lending support to the AUD/USD forex pair.


Japan’s unemployment rate fell to 2.7% in February, from January’s 2.8%, sending the JPY/USD pair higher in forex trading this morning.


South Korea’s Composite Consumer Sentiment Index rose by 0.1 point to a reading of 103.2 in March, lending support to the KRW/USD forex pair.


Thailand’s car sales surged 26.34% year-over-year to 74,489 units in February, versus a 25.81% increase a month ago. The news sent the THB/USD pair higher in forex trading this morning.

 

What’s happening: Crude oil prices recorded sharp losses on Monday, coming off multi-year highs.

What happened: Crude oil prices have remained highly volatile since the beginning of the Russia-Ukraine conflict in late February.

A lockdown announcement in one of the major regions in China, following an increase in covid-19 cases, raised concerns of a decline in energy demand.

Why it matters: Markets continued to monitor the Russia-Ukraine situation, with peace talks between the two countries expected to commence in Turkey. An end of the war will exert pressure on oil prices.

Meanwhile, the US has plans of releasing more oil from its SPR (strategic petroleum reserve) to relieve supply issues.

The decline in Russia’s crude orders from Western countries is expected to be replaced by orders from Southeast Asian nations, as countries like India and China continue purchasing oil from Russia. Indonesia’s PT Pertamina is also looking to buy oil from Russia.

Amid surging covid-19 cases, China’s financial hub of Shanghai entered a two-stage lockdown. Bridges and tunnels were closed, with restricted traffic on highways in the region.

Although the overall cases and death numbers are not as high as the previous waves, China’s strict zero-covid policy resulted in lockdowns across several regions. The news created concerns around a decline in energy demand, as China is the world’s largest importer of crude.

The OPEC+ (Organization of the Petroleum Exporting Countries and allies) is scheduled to meet on Thursday to discuss an increase to oil production quotas. The group is widely expected to stick to its plans of a modest increase in oil output starting May, despite the sharp rise in oil prices due to the Ukraine crisis.

Brent crude for May delivery declined $8.17 to close at $112.48 per barrel on Monday, after surging around 12% last week. WTI crude oil for May delivery shed $7.94 to settle at $105.96 per barrel, following around 9% gains last week.

In other energy trading, wholesale gasoline for April delivery slipped 25 cents to $3.22 a gallon, while April natural gas declined 6 cents $5.51 per 1,000 cubic feet on Monday.

What to watch: Investors will keep an eye on the OPEC+ meeting, which is expected to impact oil prices in the days ahead. Face-to-face peace talks between Russia and Ukraine will also remain in focus.

The API (American Petroleum Institute) is scheduled to release data on crude oil stockpiles later today. US crude inventories had declined by 4.28 million barrels in the week ending March 18, following an increase of 3.754 million barrels in the prior week.

The markets today

The Japanese yen will be in focus today after recording losses on Monday

 

Context: The JPY/USD forex pair fell to a six-year low on Monday, following the Bank of Japan’s announcement to contain rising bond yields.

Details: The Bank of Japan announced plans to prevent bond yields from rising above its key target and offered to purchase an unlimited amount of government bonds.

Recent data from Japan showed a spike in the annual inflation rate to 0.9% in February, with core consumer prices rising 0.6% during the month.

The US Treasury yield surged to a multi-year high, with the 10-year yields rising more than 2.5% to a three-year high, as the US Federal Reserve is widely projected to announce another rate hike in May, after starting its tightening cycle earlier this month.

The US dollar index, which measures the greenback’s performance versus a basket of major currencies, rose to a two-week high on Monday, exerting pressure on the Japanese currency. The US dollar index gained around 0.3% to 99.09 on Monday.

The US dollar climbed as much as 2.5% against the Japanese yen during Monday’s trading. The greenback surged to its strongest level versus the yen since August 2015 and also notched its biggest single day climb since March 2020 on Monday.

The Japanese yen had lost more than 7% so far in March and is expected to record its biggest monthly and quarterly declines since 2016.

The yen also recorded sharp losses versus the euro on Monday, with the ECB expected to hike rates this year.

What to watch: The ongoing conflict between Russia and Ukraine will remain a major concern. Investors will also keep an eye on rising covid-19 cases in China, Europe and other regions, with total global cases surging past 483 million.

Other Markets: European trading indices closed mostly higher on Monday, with the DAX 40, CAC 40, and STOXX Europe 600 up by 0.78%, 0.54% and 0.14%, respectively, and the FTSE 100 down by 0.14%.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY – 123.55 and 123.81 Positive
EUR/JPY – 135.81 and 136.06 Positive
WTI Crude Oil – 104.26 and 105.06 Positive
Natural Gas – 5.478 and 5.500 Positive
Nikkei 225 – 28120.66 and 28219.16 Positive

 

Market snapshot

What else to watch today

Germany’s GfK consumer climate indicator and import prices, France’s consumer confidence index, Spain’s retail sales, UK’s consumer credit, mortgage approvals, mortgage lending and net lending to individuals, Canada’s average weekly earnings, US Redbook index, Case Shiller home price index, FHFA house price index, job openings, CB consumer confidence and Dallas Fed services index, Argentina’s consumer confidence indicator and economic activity estimator, as well as South Africa’s unemployment rate, SACCI business confidence index and unemployed persons.


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