US Dollar, Crude Oil, OPEC Meeting, Coronavirus – Talking Points
- US Dollar could rise if deteriorating sentiment data spurs demand for liquidity
- Crude oil prices may recover some losses if OPEC shows signs of cooperation
- EUR/USD trading within compression zone: will the pair break higher or lower?
US equity futures traded mixed during Asia’s Thursday trading session while the petroleum-linked Norwegian Krone surged against its G10 counterparts. The likely catalyst appears to be optimism that Saudi Arabia and Russia may show some signs of coordination on policy after their fallout in Vienna in early March sent crude prices tumbling. Read more about the event here.
US Dollar Eyes Sentiment Data
Preliminary University of Michigan confidence data for April is anticipated to show a 75.0 reading, far lower than the prior 89.1 print. The expectations component is expected to reveal a 60.7 figure, almost 20 points below the prior report at 79.0. Since the United States is the largest consumer-driven economy in the world, monitoring data relating to the behavioral disposition of consumers is imperative.
A softer-than-expected report could throw off what were signs of cautiously recovering optimism as the rate of infection and deaths from the coronavirus is showing signs of easing. This derailment of sentiment could put a premium on haven-linked assets like the US Dollar and a discount on cycle-sensitive FX like AUD, NZD and its emerging market peers.
Crude Oil May Rise on OPEC Reconciliation
Crude oil prices may get a boost if Saudi Arabia and Russia are able to make amends after their fallout last month that catalyzed a double-digit selloff in crude oil as the two powerhouses entered a price war. Moscow confirmed it will be participating in the upcoming meeting. US President Donald Trump said he brokered a deal between Saudi and Russian officials that could include cutting between 10-15 million barrels per day. The meeting is expected to occur at 14:00 GMT.
However, it is unlikely that the cut to production will be able to match the drop in consumption as a result of the economic disruption from the coronavirus. The question about a recession has become less about the possibility of one and more about how severe it will be. Crude oil’s future in terms of price is in large part predicated on how the coronavirus plays out and the rate of recovery in economic activity.
EUR/USD continues to trade in the compression zone between descending resistance (labelled as “Downtrend Alpha”) and support at 1.0783. As the range narrows, time between to decide on an upside or downside breakout also ticks away. Depending on which direction the pair breaks out in, it could reveal a directional bias and could precipitate a modest recovery or accentuate the selloff.
EUR/USD – Daily Chart
EUR/USD chart created using TradingView
CRUDE OIL TRADING RESOURCES
— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter