Crude Oil stays firmer despite upbeat US Dollar, focus on FOMC, OPEC/IEA energy forecasts

Market sentiment remains dicey as the key week comprising inflation data from China and the US, as well as the central bank announcements from the US and Japan, begins with a light calendar amid holidays in China, Hong Kong, and Australia. Apart from the cautious mood and holidays, mixed geopolitical headlines and the recent shift in the Fed bias also contribute toward restricting the market moves.

Even so, the US Dollar remains on the front foot while defending Friday’s heavy gains, backed by the upbeat US employment report. The same challenges buyers of the commodities and Antipodeans, as well as exert downside pressure on the major currencies versus the Greenback.

That said, EURUSD drops to the lowest level in a month while GBPUSD remains pressured at a one-week low. Further, USDJPY prints mild gains despite mixed Japan data but AUDUSD reverses the previous day’s losses. Moving on, NZDUSD and USDCAD lack clear momentum.

It should be noted that Crude Oil prices ignore the US Dollar’s gains and remain on the front foot while Gold seesaws near short-term support after falling heavily the previous day.

Elsewhere, BTCUSD struggles to extend the weekly gains despite a jump in the sales of the NFT-like Bitcoin Ordinals. The ETHUSD, however, remains pressured amid news of another security breach in a major service provider.

Following are the latest moves of the key assets:

• WTI Crude oil picks up bids to reverse the previous day’s retreat from a one-week high, up 0.50% intraday near $75.70 by the press time.
• Gold remains lackluster around $2,300 after falling the most since November 2020 the previous day.
• The USD Index prints a fresh one-month high near 105.30, up for the second consecutive day at the latest.
• Wall Street closed with minor losses but the Asia-Pacific shares edged higher. That said, British and European shares printed mild losses during the initial trading hour.
• BTCUSD and ETHUSD both remain pressured around $69,500 and $3,670 as we write.

US Dollar edges higher as the key week begins…

The US Dollar Index (DXY) remains on the front foot at the highest level in a month after printing the biggest daily jump in two days the previous day. The US Dollar’s stellar run-up could be linked to a strong increase in the headline Nonfarm Payrolls (NFP) and the Average Hourly Earnings, which in turn questioned the previous bias about the Fed’s three rate cuts in 2024. Following the welcome US employment data, former Federal Reserve Governor and the current Director of the US NEC (National Economic Council) Lael Brainard said that the US jobs report is good news for American workers.

Apart from the US jobs data, an upward revision of the US Q2 GDP forecast by the Atlanta Fed’s GDPNow mode, from 2.8% to 3.1% also underpinned the US Dollar’s rally on Friday.

A slew of far-right parties gained popularity in Europe and challenged the well-set rulers. The same pushed French President Emmanuel Macron to call for a snap election and grabbed headlines during the weekend, which in turn weighed on the Euro (EUR) of late. However, Governor of Austria's central bank and European Central Bank (ECB) Governing Council member Robert Holzmann mentioned during the weekend that further rate cuts by the Bank could slam EUR and spike inflation, which in turn put a floor under the EURUSD prices of late. That said, ECB President Christine Lagarde also defended the higher rates and pushed back concerns for consecutive rate cuts in her speech on Friday but failed to defend the Euro pair amid a broad-based US Dollar strength backed by the upbeat US jobs report.

Although it’s a holiday in Australia and the US Dollar is up against most of the Antipodeans, the AUDUSD remains mildly bid as Reuters came out with news suggesting a “Gold Standard” plan by major economies to curb funding for coal projects ahead of this year's U.N. climate summit. The same will propel the coal price and help major suppliers like Australia.

While the AUDUSD pushed back the bearish bias while reversing from the 50-SMA support, the NZDUSD remains depressed at the lowest level in more than a week, licking its wounds after falling the most in nearly eight months. The reason could be linked to a consolidation amid holidays in China, Hong Kong and Australia amid anxiety ahead of this week’s inflation data from China and the US, as well as the Fed meeting.

USDCAD, however, remains on the front foot at a five-week high while struggling to justify the upbeat Crude oil prices. In doing so, the Loonie pair bears the burden of the mixed Canada employment report and the Bank of Canada’s (BoC) readiness for further rate cuts.

Earlier in the day, the final readings of Japan’s Q1 GDP confirmed -0.5% QOQ forecasts but improved on the Annualized basis from -2.0% to -1.8%. However, the GDP Deflator eased from 3.6% to 3.4% and stopped the USDJPY from declining, especially amid the firmer yields and fresh calls for the Fed’s delayed rate cuts. It’s worth observing that the concerns about the Bank of Japan’s (BoJ) scaling back of the monthly Japanese Government Bond (JGB) purchases act as an upside barrier for the Yen pair.

Crude oil ignores the firmer US Dollar and the market’s cautious mood to reverse the previous day’s retreat as market players appear optimistic ahead of this week’s monthly energy market forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), respectively on Tuesday and Wednesday. The reason could be linked to last week’s OPEC+ announcement of extending the supply cuts and China’s recent stimulus. Furthermore, consolidation in the Oil prices from a four-month low and doubts about the Federal Reserve’s (Fed) rate cuts, which in turn probe the US Dollar bulls now and then, as well as the hopes of witnessing lower rates from major economies, also underpin the black gold’s latest run-up.

On the other hand, Gold price remains dicey while flirting with a nine-week-old rising support line after posting the biggest daily loss since November 2020. In doing so, the precious metal portrays the market’s cautious mood ahead of this week’s top-tier data/events amid holidays in the major customer China. Furthermore, the recent challenge to the previously dovish Fed bias and chatters about the Group of Seven (G7) nations’ push to China’s small banks to refrain from helping Russia also challenges the Gold buyers.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

A likely slower start to the crucial week…

Holidays in major economies and a light calendar, as well as the cautious mood ahead of top-tier data/events, will restrict the market movements on Monday. However, Eurozone Sentix Investor Confidence for June and the French political news may entertain the EURUSD traders. That said, the equity traders’ reaction to the latest political challenges will also be worth watching and can affect the bond yields at large.

Above all, this week’s monetary policy meetings of the US Federal Reserve (Fed) and the Bank of Japan (BoJ) will be crucial to watch while inflation from the US and China, as well as the UK employment report, could also entertain the momentum traders.

May the trading luck be with you!