The OPEC+ monthly meeting has had to be extended over concerns that oil prices will drop from these elevated levels if the nations bring too much oil to market in the coming months. The US dollar is also rising, and this may have a negative impact on the liquid commodity.
One thing the markets do not like is uncertainty. The focus today will be how well the OPEC+ nations can come to some sort of agreement about how much supply is needed into H2 of 2021. There is a real concern that oil prices will drop if the oil nations were to ease cuts and although Russia and Saudi Arabia are willing to take that risk, the United Arab Emirates, Kazakhstan, and Iraq are concerned about 2 million extra barrels per day that could come from an easing of cuts and Iran’s contribution should sanction get lifted.
Oil prices started the new month off with a close above $74 and settled mid-way in the day’s range. It is unlikely that the disagreements which caused the major sell-off last year would re-emerge and a consensus view of an extra 500k BPD is most likely to happen. This means the oil contract is likely to continue moving towards the 2018 swing high and above $80 in the near future.
The weekly chart shows that the 20, 50, and 200 period moving averages are all indicating higher momentum. Price action is above the last 200 bars and the LCrude CFD is making higher highs and higher lows. It would take a $15-$20 drop in prices to reverse this trend fully and even though the stochastic indicator is overbought in the daily and weekly time frames, in a trend, this only confirms what the market structure is telling us. I don’t see this as any reason to look for a short.
The increasing oil prices are going to give the Canadian dollar a bid, but for the USDCAD the price action is going to start going sideways if the US dollar continues to catch a bid.
With the US NFP also out today, the EURUSD is looking to test the rising trend line support and possibly take the swing lows and the stops underneath them. The price action is now confirming lower lows and lower highs, the moving averages are all above the current price and rolling over, so a break of the support line and we could accelerate towards the 1.1700 for TP1 and 1.1600 for a TP2 target. The record decline in Spanish Unemployment didn’t move the dial for the direction of the euro, so all eyes are on the US dollar later today.
If the markets were worried about anything major, the yen would be catching a bid. As it is the USDJPY is now accelerating away from its recent breakout level.
The USDJPY sentiment indicator on the ActivTrader platform is showing how the acceleration in bullish price action is inverse to the increase in short positioning by retail traders on the platform. These traders are going to get squeezed out at some point and that may be where the bulls take profits. I will definitely be keeping an eye on this.