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Crude Oil, WTI, Brent, US Dollar, Israel, USD, Gold – Talking Points

  • Oil prices have leapt higher as markets re-appraise the Middle East
  • The US Dollar resumed strengthening as perceived havens gain favour
  • If geo-political conditions remain unstable, is that supportive of WTI?

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Crude oil prices jumped higher today as markets take stock of the tragedy unfolding in the Middle East.

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Hopes for peace in the region have diminished in the aftermath of the military offensive of Hamas into Israel.

The WTI futures contract is near US$ 86 bbl while the Brent contract is around US$ 87.50 bbl.

For markets, stereotypical haven status assets such as gold and the US Dollar have benefitted in somewhat of a befuddled day for markets.

Japan, South Korea and Taiwan are on holiday, while Hong Kong has seen limited trading hours due to a typhoon and the US will be away due to Columbus Day.

Spot gold is back above US$ 1,850 an ounce while the DXY (USD) index up around 0.20%.

Growth and risk-sensitive assets are on the backfoot with the Aussie and Kiwi seeing the largest losses leading into the start of the week.

USD/JPY is steady above 149.00 while GBP/USD is holding ground above 1.2200 at the time of going to print.

Supporting the US Dollar, Treasury yields continued to higher levels after a robust jobs report on Friday that saw 336k jobs added in September.

The benchmark 10-year note eclipsed 4.88% in the aftermath, the highest return for the low-risk asset since 2007. It has since settled near 4.80%.

Looking forward, it appears that the markets are perplexed on how to interpret the events of the last few days and with some holidays and a lack of significant economic data release, volatility could evolve.

The full economic calendar can be viewed here.

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WTI CRUDE OIL TECHNICAL SNAPSHOT

Last week’s sell-off in the WTI futures contract broke below the lower band of the 21-day simple moving average (SMA) based Bollinger Band.

Today it has emphatically traded back within the band and if it closes inside the band at the close today, it may signal a pause in the bearish move or a potential reversal.

Nearby resistance could be at the breakpoints of 87.76, 88.15 and 88.19. On the downside, support may lie near the breakpoints of 84.89, 83.53,83.34 or the prior low at 81.50.

WTI CHART

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Chart created in TradingView

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Understanding the Core Fundamentals of Oil Trading

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCarthyFX on Twitter

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