- US Dollar (USD) strength negatively affects the commodity basket.
- Trade uncertainty remains in play despite the US-China truce.
- Geopolitical tension between the US and Iran, coupled with supply restrictions, continue to limit the downside.
With the USD carrying its NFP-backed strength forward, coupled with fresh doubts on US-China trade deal, WTI remains on a back foot around $57.70 during early Asian morning on Monday.
The greenback surged across the board on Friday after the US headline employment data, Nonfarm Payrolls (NFP), beat most optimistic forecasts and turned down the expectations of a 50 basis points (bps) rate cuts from the US Federal Reserve in its upcoming meet. The USD has a negative correlation with the commodities.
Adding to the downside could be the latest doubts on the US-China trade truce raised by China’s SCMP news report. The Chinese daily mentioned to ignore the hype about the US President Donald Trump and his Chinese counterpart Xi Jinping being closer to a trade deal.
However, geopolitical tension between the US and Iran, coupled with global supply reduction from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, offer strong downside support to the black gold.
Responding to the latest news concerning Iran increasing its enriched Uranium stock, the US President warned the nation to better be careful after a nuclear breach. The BBC also quoted the US Secretary of State Mike Pompeo on the subject when he said that it would only lead to “further isolation and sanctions” for the nation.
Technical Analysis
A 100-day exponential moving average (EMA) limits the immediate upside of the energy benchmark around $58.10, a break of which can propel prices to 200-day SMA level of $59.00 and then to $60.00 round-figure.
On the downside, 21-day EMA level of $57.00 and latest lows surrounding $56.00 can offer immediate support to the quote ahead of dragging it to June 10 high near $54.80.
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