US AM Digest: Oil Price Rises to 4-Year Peak Ahead of Iran Nuclear Deal Deadline

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US Market Snapshot via IG: DJIA +0.4%, Nasdaq 100 +0.5%, S&P 500 +0.3%

Major Headlines

  • Oil prices surge to 4-year highs with WTI and Brent above $70 and $75/barrel respectively
  • German Industrial Orders post surprise drop in March
  • Bank of Japan Minutes reiterate that the BoJ should maintain current policy amid distant inflation target
  • UK Participants away for Bank Holiday

USD: Buying in the USD has resumed this morning after a slight stall on Friday, post mixed US Jobs report. DXY saw a break above Friday’s high and now looks to extend a move towards the December high of 94.22. Buying interest in the greenback has largely been attributed to the selling in EUR, which posted fresh YTD lows, briefly dipping below 1.1900.

EUR: No rest for the selling pressure in the Euro, the latest CFTC data on Friday showed that net-long speculators continued to head for the exit amid the fears of deteriorating growth in the Euro-Area. However, net-long positioning is still at elevated levels, providing more risk of further selling in the Euro. This morning saw the release of German industrial orders, which surprising fell in March, consequently adding to the continuous run of poor German data, while Eurozone Sentix Investor Confidence fell to the lowest level since Feb’17.

Oil: WTI and Brent crude futures have begun the weak on the front foot with prices rising over 1% to move above $70 and $75/barrel respectively ahead of the May 12th deadline on whether the US will waiver sanctions on Iran. The increasing geopolitical concern over whether the US will pull out of the Iranian nuclear deal has kept prices afloat, alongside this, weekend reports from Saudi Arabia stated that they prefer oil prices around $80-$85, which has also painted a rosier picture for oil bulls.

DailyFX Economic Calendar: Monday, May 7, 2018 – North American Releases

DailyFX Webinar Calendar: Monday, May 7, 2018

IG Client Sentiment Index: Oil Chart of the Day

Oil – US Crude: Data shows 34.9% of traders are net-long with the ratio of traders short to long at 1.87 to 1. In fact, traders have remained net-short since Apr 09 when Oil – US Crude traded near 6366.0; price has moved 9.5% higher since then. The number of traders net-long is 8.1% lower than yesterday and 17.4% lower from last week, while the number of traders net-short is 3.8% higher than yesterday and 11.9% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil – US Crude prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bullish contrarian trading bias.

Four Things Traders are Reading

  1. CoT Update – Euro Speculative Long Shrinking, but Plenty More to Sellby Paul Robinson, Market Analyst
  2. EUR/USD Weekly Technical Forecast: Fresh YTD Lows Keeps Lasting Bearish Trend Intact” by Justin McQueen, Market Analyst
  3. Eurozone Investor Confidence Falls to February 2017 Low on Trade War Fears” by Justin McQueen, Market Analyst
  4. Bitcoin, Ripple & Ethereum Charts at a Glance” by Paul Robinson, Market Analyst

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— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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