As OPEC+ is unlikely to increase production, Brent Oil remains supported despite higher US dollar
The Aussie has taken the lead lower after the RBA failed to impress the markets with their policy decision. The question is will the Fed and Bank of England deliver on market expectations for a tightening of monetary policy? The US dollar is up for the day and the US equities are smashing through all-time highs daily.
Market Wrap
The forex heatmap is moving to a risk-off pattern with the lower-left corner turning red and the upper right corner turning towards the green. The antipodean currencies have been under pressure all day since the RBA statement in the overnight session.
The AUDUSD is now below the daily 200 ema and back to testing the 20 and 50-period EMAs. 0.739 and the 50-day ema will be a key level of dynamic support and is likely to get tested before the FOMC meeting press conference tomorrow. However, it is more important on where the AUDUSD closes tomorrow that will give traders more of an idea of whether or not the bear trend is back in play or whether this is some traders taking profits after a 200 pip bullish trade.
The US dollar on the H4 chart is showing how the $94.00 level is a pivotal level as the price is coiling around it ahead of tomorrow’s big monetary policy announcement. Today there were a few money market moves, with the Fed conducting a $1.329 trillion reverse repo which shows that the collateral needed in exchange for US dollars is still ongoing and that the debt ceiling and treasury issuance needs to be sorted out.
US House Speaker Pelosi said that she thinks votes could start for President Biden's spending plans by the end of the day, which means the debt ceiling may also be moving forward very soon.
The US equities markets are on a rip, but it is not easy to hold when the indices touch all-time highs and big figure levels, as there is always the risk that the level will be the one everyone else is going to take profits at.
Buying the dip is the safer way forward rather than aggressive breakouts as we saw today in the Nasdaq. The 16000 level is a magnet for the tech-heavy index, but rising US 10-year rates are stopping the flows at or around the Initial Balance highs. For the Dow Jones Industrial Average yesterday traders tested the 36,000 level and took profits, today it held little resistance and the industrial average kept rising.
When Microsoft and Apple are both in the green and up around 1% for the day, it’s a great boost for the other 28 companies in the index but Pfizer’s revenue of $24.1 billion in the third quarter beat expectations and this moved the market. Later on, this afternoon companies including T-Mobile, Lyft, Amgen, and Mondelez are set to report after the US close.
It is unlikely that the DJIA can trade within this tight rising channel for much longer, but it does point the way to 37k, and looking across the price action, the Breakout, Retest, and Continuation worked out as it should. The moving averages on the daily time frame will give traders some dynamic levels of support to work with but they are a long way below current trading levels, so sharp pullbacks could be the key play for anyone looking to get in that didn’t already.
The pound is also under pressure from the stronger greenback today and also news that European officials are now expecting the UK to trigger Article 16 of the Northern Ireland protocol this month, once the COP26 is out of the way. Earlier today the UK fishing vessel being held by the French authorities was released.
Brent oil is trading higher again at the time of writing after a bit of a dip earlier today. OPEC+ is expected to ignore international calls for extra oil this week and there have even been reports that some oil nations have been struggling to deliver their quotas to make up the 400k barrels per day. Later today the US API crude stocks will show whether there is still a build or rising demand.