Fx markets continued last week’s tone in early trade as the USD continues to dominate, with the EURUSD peeking through key support at 1.0800 while the USDJPY finally broke the illusive 107.00 to trigger stops as bears relinquish more ground. Even the GBPUSD has given back some ground, albeit nowhere near the losses suffered by other currencies as we see the pair trade back down to the 1.2550 level. US Equities continue to trade in the green as we see investors hop on the Trump good for business” bus while Gold is severely punished, making its way to the 1200 handle. Further gains are expected should the markets remain bullish Trump, if not we will see a reverse in risk mentality as the USD gets sold off in favor safe havens.
Crude oil futures opened the day flat to negative as the USD continues to strengthen, suppressing the USD linked commodity. Oil supply concerns still hover over the sector as we see touts of an oil supply cut being undermined by several OPEC members, despite Saudi Arabian Energy Minister, Al-Falih, remaining adamant that an OPEC deal in which production is reduced will be reached. Iran, who has only just re-entered the oil market after several years of restrictions continues to push production, opening 3 new oil fields with an estimated total production of 220K barrel per day.
The price of crude will continue to be influenced by supply and demand factors and markets will be sensitive to any news which confirms that either demand is increasing or supply is decreasing. Should OPEC reach a deal to suppress supply or should we see an uptick in global economic growth, we would expect crude oil to be snapped up off its $43 lows as it pushes back toward the $50 handle. However, should the strain between OPEC members continue or if demand is dampened further, we would see crude oil slump further as support give way and the commodity traded below $40 per barrel.