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XTB TRADEBEAT

Oil close to 3-year high as stocks pull back on US-China news

Summary:

  • Brent Oil hits highest level since May 2015 but fails to build on DOE draw
  • US500 and DE30 both pullback after recent gains
  • Preview of US earnings season 
  • USD gets hit on reports China will scale down UST purchases
  • Bitcoin bounces after early weakness; Dimon regrets "fraud" comments
  • Scandi currencies enjoy solid day of gains

Following a large drawdown in excess of 11M barrels last night, Brent Oil broke above the $69 handle to trade close to its highest level in 3 years. The market remains just below the peak seen in May 2015 on the European close despite another drop in this afternoon’s DOE number but a break above there would leave little by the way of swing resistance overhead for quite some time.

There’s been some weakness in equities today with several indices pulling back after a strong start to the New Year. The DE30 is one of the worst hit and lower by almost 1% whilst the US500 remains red but has moved off its lowest levels of the day during the afternoon trade.

Traders will be eagerly awaiting the forthcoming earnings season with the major banks set to kick-off the Q4 results this Friday. On the annual basis investors expect earnings to grow at the rate of 10.9% in the fourth quarter of 2017 for the whole index.

One reason for the softness seen in stocks today was some unexpected news from the Far East with reports suggesting that China is looking to slow down and possibly even stop its purchases of US Treasuries. The news saw yields rise with the Tnote falling to its lowest level since March while the USD and stocks also took a hit. Gold reacted positively to the news, spiking higher and briefly popping above 1325 to trade at its highest level in several months.  

Crypto markets have been typically volatile today with some fairly broad based selling seen early on despite revised less-negative comments from Jamie Dimon. The JP Morgan CEO backtracked on his comments last September when he labelled Bitcoin a fraud, saying he regretted it. However, the retraction wasn’t full and he still seems to be far from bullish on the market. Bitcoin had earlier fell by more than 6% but it has subsequently recovered as the day wore on and is back above 14000 at the time of writing. The 50 day SMA is in close proximity and today’s close for the D1 candle could be keenly watched with price not closing below the 50 day SMA since September.  

A look across the G10 space today reveals that Scandinavian currencies are performing well with the SEK and NOK both rising strongly.  The cause behind the move higher in the Swedish currency is likely down to the publication of the minutes from the most recent Riksbank meeting, while the NOK has benefited from a pick-up in its latest CPI numbers. 

 

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