The rise of oil prices overspills to other markets

BoC expected to stand pat

In today’s American session, we highlight from Canada, BoC’s interest rate decision. The bank is widely expected to remain on hold, while the market also seems to be currently, marginally pricing in a rate hike in the December meeting. Should the bank keep rates unchanged, which is also our base scenario, market attention may turn towards the bank’s forward guidance. A possibly hawkish tone, could support the Loonie, while a neutral stance or even a dash of dovishness could weigh on CAD.  

US equities slip as oil and bond yields rise

US equities slipped yesterday and its characteristic that S&P 500, Nasdaq and Dow Jones ended their day in the reds. On a fundamental level, the rise of oil prices increased the uncertainty of market participants about inflationary pressures in the US economy but also a possible squeezing of profit margins. Furthermore, the rise of US bond yields intensifies market concerns on a fiscal level, causing a more cautious approach by market participants, also weighing on US equities. 

Renewed US attacks push oil prices higher

In maybe the most consequential movement in the markets yesterday, oil prices rose, as US and Iran exchanged fresh strikes, with the issue overspilling in the FX and equities markets. The developments maintain, if not intensify, market worries for the supply side of the international oil market pushing oil prices higher. A possible easing of tensions between the US and Iran, could allow oil prices to drop.  

USD’s strengthening continues to weigh on gold’s price

Gold’s price continued to fall yesterday, negatively reacting to the strengthening of the USD. Market worries for high oil prices and persistent inflationary pressures in the US economy, fanned expectations for the Fed to tighten its monetary policy. Furthermore, the rise of US yields has made bonds more attractive as an alternative investment to gold.

Other highlights for today

In today’s American session, we get from the US, August’s ADP national employment figure, the US factory orders for July and the weekly EIA crude oil inventories figure, while the Fed issues the Beige book. In tomorrow’s Asian session, we get Australia’s trade data for July and China’s rating dog Services PMI for August, while RBA Ass. Governor speaks.

Charts to keep an eye out

USD/CAD used the 1.3880 (S1) support line as a platform to rise higher in today’s Asian session. We maintain a bullish outlook for the pair and intend to keep as long as the upward trendline guiding it remains intact. Yet we also warn that the RSI indicator has not surpassed the reading of 50, implying an evaporation of the bearish market sentiment but no bullish outlook. Should the bulls maintain control over the pair’s direction, we may see it aiming if not breaking the 1.3990 (R1) resistance line. Should the bears take over, we may see gold’s price breaking the 1.3880 (S1) support line. continue to break also the prementioned upward trendline, in a first signal that the upward movement has been interrupted and start aiming for the 1.3730 (S2) level.

USD/CAD Daily Chart

WTI’s price continued to rise yesterday breaking the 88.60 (S1) resistance line, now turned to support. In continuance of yesterday’s opinion we switch our sideways motion bias in favour of a bullish outlook and intend to keep it as long as the upward trendline guiding oil prices remains intact. Should the bulls control WTI, we may see its price aiming if not breaking the 93.30 (R1) line with the next target for the bulls being set at the 98.50 (R2) area. Should the bears be in charge, WTI’s may break the 88.60 (S1) line, break also the upward trendline and start aiming if not reaching the 72.00 (S2) support base.

WTI Daily Chart

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