Oil clings on to the daily 200 EMA ahead of the OPEC+ meeting tomorrow

With the raised volatility there has been a noticeable change in the size of the moves recently. For swing traders and intraday traders, this is a good thing as the volatility gives opportunity. However, for trend followers, this is a time where you need to pick an entry, reduce the position size and have wider stops.

Morning Brief

The Asia-Pac session was a rather interesting few hours as the prior US session price action was unwound. The Caixin Manufacturing PMI from China came in below expectations and the previous figure of 50.6. The 49.9 reading for November shows a slight contraction in the manufacturing data. The Chinese data followed a slightly less-bad Australian GDP number. Seasonally Adjusted real GDP QoQ came in at -1.9% which beat expectations of -2.7%.

Prior to the London open news from the front line in Ukraine came through that 125k soldiers are now preparing to face pro-Russian separatists. The Ukrainian Foreign Minister said he will update NATO about the security situation and called for more sanctions as a deterrent.

The UK house price index from Nationwide was up by 0.9% beating expectations of 0.5% and above the previous 0.7% reading for October. Whereas the German retail sales data came in worse than expected for MoM and YoY readings.

A lot of focus will be on the oil markets today as the Joint Technical Committee (JTC), Joint Ministerial Monitoring Committee (JMMC) and OPEC+ meetings will start from today and conclude tomorrow. There is now a case for a pause to the planned monthly 400k barrels per day output hike as a rising COVID case count is going to destroy demand.

After falling to a three-month low the day before, oil futures rose over 3% today to test the daily 200 EMA. Over the last week, U.S. crude stockpiles declined by 700,000 barrels, triggering a change in sentiment.

The forex heatmap is suggesting today is starting off more risk-on, with a move into the commodity pairs and out of the yen.

The US dollar index has not broken the bullish market structure yet, so we could be in for another mixed-up day in terms of dollar crosses. Fed Chair Powell is once again testifying but it is doubtful he will move the markets as much today as he did yesterday. However, headlines that do come from his testimony could be confluent with other headlines and we could get some range expansions. Yesterday’s price action ended as an outside day, which is a bearish pattern, so a break of yesterday’s low price and we could see a larger move towards $94.50 and previous resistance.

The GBPUSD has now fully tested the larger descending channel lower bounds but until it gets back above the 1.3520 level and previous significant swing high, it will be hard to be bullish on the pair. There is a 10-year bond auction and Bank of England governor Baily speaks just before the US opens today. So, it may be better to wait until after those two events have passed to assess the next possible steps to take.