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  • WTI recovers from $42.68 amid a less active session.
  • Risk-tone stays sluggish, US dollar refreshed 28-month low on Monday.
  • Manufacturing PMIs from China and the US will be the key ahead of API data.

WTI takes the bids near $43.00 ahead of the Tokyo open on Tuesday. The energy benchmark failed to justify the US dollar’s drop to the multi-month lows the previous day as markets searched for fresh clues amid a light calendar and mixed sentiment.

The US dollar index (DXY) refreshed the 28-month low while declining to 91.99 even as Dallas Fed Manufacturing Business Index grew beyond -3 to +11 in August. Also on the positive side were the comments from the Fed Governor Richard Clarida who ruled out odd for negative rates.

Furthermore, better than forecast NBS Manufacturing PMI from China, 51.00 versus 48.7 expected and 51.1 prior, also suggested the black gold’s upside but was largely ignored.

The reason could be spotted from the market’s fears of the US-China tussle and uncertainty surrounding the American aid package to combat the coronavirus (COVID-19). As per the latest developments, China will be able to diver the TikTok sale whereas the US Democrats remain at loggerheads with the ruling Republicans over the much-awaited stimulus package.

Elsewhere, the global oil supply is likely to increase considering the receding fears of the hurricane Laura and the recent surge in the Baker Hughes Rig Counts. Additionally, the OPEC+ decision ease the global output cut can also pressure the energy prices.

Talking about the scheduled data, China’s Caixin Manufacturing PMI may recede from 52.8 to 52.6 whereas the US ISM Manufacturing PMI can keep the strength with 54.5 figures versus 54.2 prior. It’s worth mentioning that the weekly inventory data from the American Petroleum Institute (API) marked sustained depletion with -4.524M prior.

While the economics are likely to favor the further recovery of oil prices, qualitative catalysts are against the upside.

Technical analysis

With multiple Doji candlesticks marked during the last week’s daily chart, buyers seem to be exhausted and may refrain from fresh entries unless the quote crosses the previous month’s top near $43.85. On the contrary, 21-day EMA and an ascending trend line from July 30, near $42.55/50 becomes the key support.


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