Oil Prices Surge on Libya Oil Production Close-down

• Eye on Today’s Initial Jobless Claims while Dollar standing pat. 
• Sterling faced headwinds as civil unrest in the country intensified. 
• Oil prices stimulated by Libya’s biggest oil production field closing down. 

Market Summary

The U.S. dollar remains stable amidst significant market volatility this week. The low NFP reading from last Friday has cast a shadow over the economic outlook, and the Yen carry trade situation may worsen if the BoJ continues to tighten its monetary policy. Traders are closely watching today’s U.S. job data, including initial jobless claims, to gauge the dollar’s strength.

In the UK, ongoing riots in multiple cities have harmed the strength of Sterling, which performed poorly among its peers in the last session. Conversely, the New Zealand dollar continues to be bolstered by the upbeat job data released yesterday. The RBNZ’s upcoming interest rate decision has fueled speculation of a hawkish monetary approach due to the strong job data.

In the commodity market, gold prices are trading sideways after plunging below the $2400 mark. However, gold has found support near the $2380 level, awaiting a catalyst to break its price consolidation range. In the oil market, prices recorded their biggest gain in August following a production halt at Libya’s biggest oil field, which produces nearly 270,000 barrels of oil per day. Additionally, the U.S. weekly crude stockpile data came in significantly lower than market expectations, alleviating concerns over crude demand.

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Current rate hike bets on 18th September Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (88.5%) VS -25 bps (11.5%) 

Market Movements

DOLLAR_INDX, H4

The US Dollar remained flat after a recent significant rebound. However, the long-term outlook for the dollar remains pessimistic due to expectations that the Federal Reserve might cut rates by as much as 50 basis points in September, diminishing the appeal of the dollar. Investors should continue monitoring further US economic data, including the US Initial Jobless Claims, which are due to be released later today, to receive further trading signals.

The Dollar Index is trading flat while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 29, suggesting the index might enter oversold territory. 

Resistance level: 104.05, 106.05

Support level: 102.40, 100.90

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XAU/USD, H4

Gold prices tumbled, hovering around a strong support level of $2,380. The overall trend for gold remains consolidative as investors adopt a wait-and-see approach, awaiting further market catalysts. The focus of market participants is now shifting towards the equity market, potentially slowing the movement for gold. There are both bullish and bearish factors at play in the gold market. On the positive side, a pessimistic global economic outlook and expectations of a rate cut from the Fed could support gold prices. However, if the global equity market continues to tumble, institutional investors might be forced to sell off gold to cover their margins or seek dip-buying opportunities in the equity market.

Gold prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 36, suggesting the commodity might enter oversold territory. 

Resistance level: 2415.00, 2450.00

Support level: 2380.00, 2355.00

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GBP/USD，H4

Pound Sterling continues to trade in a lacklustre manner as the country faces civil unrest over anti-immigrant issues. This unrest is harming economic performance and eroding confidence in Sterling, which has weakened significantly in recent sessions. Meanwhile, the U.S. dollar is also directionless, with traders awaiting today’s initial jobless claims report for clues on dollar strength. This data could provide insights into the U.S. labour market’s health and influence the dollar’s movement.

GBP/USD remains trading within its bearish trajectory while dropping below its next support level at 1.2680, suggesting a bearish signal for the pair. The RSI has been hovering near the oversold zone, while the MACD is edging lower, suggesting the pair’s bearish momentum remains intact. 

Resistance level: 1.2780, 1.2850

Support level: 1.2630, 1.2550

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NZD/USD，H4

The NZD/USD pair is currently positioned at its recent high, awaiting a catalyst to break the next resistance level at 0.6020. The strength of the Kiwi has been fueled by the recently released New Zealand job data, which has heightened expectations of a tighter monetary policy from the Reserve Bank of New Zealand (RBNZ). With the RBNZ’s next interest rate decision approaching, market participants are closely watching for any signals. Additionally, today’s U.S. job data could also play a pivotal role in influencing the pair’s movement, as it may impact the U.S. dollar’s strength and the broader market sentiment.

The pair’s ability to sustain above its key support level at 0.6000 suggests a bullish bias. The RSI is about to cross into the overbought zone, while the MACD is edging higher, suggesting that bullish momentum is gaining. 

Resistance level: 0.6020, 0.6080

Support level: 0.5960, 0.5915

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NIKKEI225, H4

Global financial markets, particularly equities, continue their aggressive selloff. During early Asian trading hours, Japanese stocks remained downbeat, extending the volatile trading of the past week as investors grew increasingly pessimistic about the global economic outlook. Uncertainties over monetary policy decisions from major central banks, including the Bank of Japan, and falling US Treasury yields have further heightened the risks associated with carry trading in Japan. Currently, global risk appetite has soured, and investors should monitor market movements closely for further trading signals.

NIKKEI225 is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 44, suggesting the index might extend its losses since the RSI stays below the midline. 

Resistance level: 35645.00, 37865.00

Support level: 33745.00, 31935.00

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S&P 500, H4

US equity markets retreated, with several major corporations experiencing significant losses. For example, Super Micro Computer Inc. tumbled by nearly 20% after releasing a disappointing earnings report. JPMorgan economists have raised the probability of the US entering a recession by the end of this year to 35%, up from 25% at the start of the month. The ongoing fears of recession and rising market volatility continue to cast a pessimistic outlook on high-risk US equity markets.

S&P 500 is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 32, suggesting the index might enter oversold territory. 

Resistance level: 5400.25, 5670.00

Support level: 5150.00, 4949.70

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CL OIL, H4

Crude oil rebounded sharply on the back of a bullish inventory report. According to the Energy Information Administration (EIA), US crude oil inventories declined by 3.728 million barrels, a much larger drop than the market expectations of 1.600 million barrels. This significant decline in inventories has bolstered the oil market, indicating stronger demand and tighter supply conditions.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 58, suggesting the commodity might extent its gains after breakout since the RSI stays above the midline. 

Resistance level: 75.40, 78.55

Support level: 72.45, 70.40