U.S. Market: All About the Black Stuff Now

It is all about the Black Stuff at the moment, and all about the speculative interest in the oil markets that may be getting a short squeeze as the USD breaks and holds new ground.

The daily charts on oil have shown that $104.00 may be with the market sooner rather than later, and from there it seems that the magnetism of $100 will force the market to test the support at that level. After the passing of Hurricane Gustav through the Gulf Coast refining area the market has driven crude price through major support and is currently trading around $108. These moves add to the recent dollar buying momentum.

Added to oil prices dropping is another USD positive; Futures numbers are indicating a higher start for the main U.S. equity markets, not just in the green, they indicate that a day's worth of trading gain on the Dow Jones is very likely to be seen at the open of the first day of U.S. trade this week. "If that is the case the dollar is likely to find more buyers" said Anthony Tillman, Trade Desk Director at TheLFB-Forex.com, "the Usd/Jpy pair may feel the need to test near-term upside resistance, and the cad traders may need to test the resolve of short-sellers ahead of the Bank of Canada’s interest rate decision on Wednesday, with another test of the 1.0750 area."

"The 10 year U.S. treasury yield is holding around 3.85%, and U.S. mortgage rates are continuing their moves lower, both signs that dollar bulls will be happy to see" Tillman added. If yields can hold 3.8% and mortgage rates filter through to the consumer the outlook for U.S. growth in 2009 is likely to positively impact the valuations on the Usd through 2008.

The near-term test of dollar resolve is the 10:00 EDT release from the Institute of Supply Management who report the U.S. manufacturing survey numbers. The expectation is for the sector to print under 50, and therefore show contraction in manufacture. The 49.9 read may not impact the dollar too much initially; the impact may be seen more in the equity market. If equities are getting bought anyway, then the dollar may more easily be able to absorb the expected read more easily.

The next major release after the ISM numbers is the Australian GDP report, where the market will get to see the value of all goods and services produced in the region, and after the rate cut to 7.00% on Tuesday all eyes will be on where future growth is coming from, and whether it will be strong enough to stop the RBA from cutting again this year.

Comments

[User 143167:]

To celebrate a oil price plunge due to globle economy meltdown is the weirdest thing I see this year. This only confirms one thing to me: Americans are born with optimism.

2008 Sep 02 10:55 AM

[mangolfer:]

When filling your auto with fuel and not feeling like you are being ripped off is a great feeling. Oil still has a long way to go. Dropping oil prices have a positive effect on consumer spending and the equities market.

2008 Sep 02 11:43 AM

[User 143167:]

Oil prices went down because consumer bought less. You believe that people bought less oil due to weaker purchasing power but at the same time more other stuffs look very self-contridictory, to say the least... It is as strange as to say poeple tends to buy discretionaries before staples.


On Sep 02 11:43 AM mangolfer wrote:

> When filling your auto with fuel and not feeling like you are being
> ripped off is a great feeling. Oil still has a long way to go. Dropping
> oil prices have a positive effect on consumer spending and the equities
> market.

2008 Sep 02 11:53 AM