PMIs spark Crude selloff; hypes USD/CAD

As a result of the slowdown in manufacturing in the worlds 2 largest economies, crude oil took at hit

Energy 3

Final manufacturing PMIs released near the 1st of each month don’t have much of an impact on markets, as they are usually little changed from the PMI Flashes, released around the 20th each month.  However, China’s Caixin Manufacturing PMI and the US Manufacturing ISM do have an impact, as it the first time the markets get to view the manufacturing data. Today’s release of the Caixin Manufacturing PMI for July was 50.3, just above the expansion/contraction level of 50, vs 51 expected and 51.3 in June.  In addition, the US ISM Manufacturing PMI for July was 59.5 vs 60.4 expected and 60.6 in June.  This was the weakest print in 6 months.

What are economic indicators?

As a result of the slowdown in manufacturing in the worlds 2 largest economies, crude oil took at hit.  US OIL was down over 3.3% today on worries of lower demand due to slower manufacturing and the delta variant of the coronavirus making its rounds. On a daily chart, US OIL has been moving higher since putting in a local low near November 2nd, 2020 near 33.67.  On March 8th, the trend higher began forming an ascending wedge, which reached a high of 76.95 on July 6th.  On July 19th, Crude Oil broke aggressively below the wedge, only to reverse 2 days later.  This 3-candlestick reversal formation is known as a Morning Star formation.  On Friday, price closed back within the wedge, only to fail today.  Strong resistance is above at the bottom trendline of the channel and horizontal resistance near 73.22.  If price breaks above there, it can test the recent highs at 76.95, and then the upper trendline of the wedge near 79.00.  After failing to hold above resistance today, Crude can fall to the July 20th lows at 65.11, then the 38.2% Fibonacci retracement level from the November 2nd, 2020 lows to the July 6th highs, near 60.39.

Source: Tradingview, Stone X

How to start oil trading

USD/CAD trades inversely to Crude Oil.  As a result of the sell off in Crude today, USD/CAD moved higher, from 1.2468 to a high of 1.2515.  However, the 240-minute shows that after retracing 50% of the move from the low on March 18th to the high on July 19t near 1.2414, the pair bounced.  USD/CAD is banging it head against horizontal resistance at 1.2512.  Resistance above is that the upward sloping trendline from the June 9th lows near 1.2570. Above there is horizontal resistance near 1.2672.  Support is at the recent lows near 1.2414, the 61.8% Fibonacci retracement level from the previously mentioned timeframe near 1.2320.   Additional horizontal support is at 1.2320.

Source: Tradingview, Stone X

With little movement in the US Dollar today, the move higher in USD/CAD can be attributed to the selloff in Crude Oil.  The move lower in oil may have been due to fears of lack of demand.  Don’t forget the API reports on Tuesday and the EIA reports on Wednesday! If they show a build in inventories, the moves we had today could continue.

Learn more about forex trading opportunities.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.