A range-bound US dollar, but Oil keeps pressing higher

The world of forex is trading in a tighter range than usual as we wait for the main event this week. The US indices are trying their hardest to keep pushing for new all-time highs and Oil is rising on stronger demand and hope that the vaccines are going to continue working.

Market Wrap

Brent crude oil closed the London session higher today with a 0.77% gain to trade at $71.75 per barrel around the time of writing. The price action is pressing up against the broken ascending trendline and into the swing high that formed just before the big sell-off, so it will be interesting to see whether today’s data from the EIA can push us through this confluence of resistance. Last week’s commercial crude oil stockpiles for the United States decreased by 3 million barrels. The figure is around 6% below the five-year average for this period.

Total commercial petroleum inventories decreased by 4.8 million barrels last week. The drawdown on stocks while the refiners are running at 92% capacity should see higher energy prices as clearly there is strong demand currently.

The German DAX index dropped today on the back of worse than expected German Ifo Business Climate data. The reading came in at 99.4 below the expected 100.2 and the previous month had been revised lower to by 0.1. The biggest drag on sentiment was from the business expectations component, which fell to 97.5 from 101.0 the previous month.

In the US session, the Nasdaq opened higher but then fell back into yesterday's most traded prices, whereas the Dow Jones Industrial Average broke out of the first hours trading range and made a measured move higher. The S&P500 not only made new highs but was able to keep hold of them come the London close as we approach what could be the pivotal moment for all equities when Fed Chair Powell speaks at the Jackson Hole Symposium on Friday.

The forex heatmap has taken on a different complex since this morning with the Japanese yen becoming the weakest relative to the rest of the major currencies. The US dollar has started off the day with strength but looking at the US dollar index shows the moves higher were contained and Monday low has been a magnet for the last few trading sessions.

Some may be looking at the current intraday price action is forming a bear flag but all technology will be irrelevant in the face of some new macro fundamentals that will no doubt come from this Jackson Hole Symposium that starts tomorrow.

Another piece of info that was bearish for the US dollar today was the US durable goods data for July. The previous reading had been revised down by 0.1% and the current reading came in at -0.1% which was bad but not as bad as expectations. The graph shows that it is the first decline in three months as orders for transport equipment were down by 2.2% while computers and electronics declined 0.4%.

Excluding defense, the figure was down 1.2% month-on-month. The good news was shipments of manufactured durable goods jumped to $257.8 billion.