As US/Iran talks continue, the price of crude oil continues to fall, now reaching a level not seen since before the war began.
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Crude Oil is in focus as the talks between the USA and Iran hold for now without any military action, although it is unclear how that will end when the 60-day truce period expires in mid-August. For now, it is having the effect of sending the price of crude oil lower as the Strait of Hormuz reopens and sees more crude oil transiting. An important milestone was reached yesterday - the price of WTI broke below $70 a barrel to reach where it was trading the day before the war broke out on 28th February. This makes a short trend-following trade attractive, but I have to question how much more crude oil will fall, as the price is now almost back in its area of comfort where it consolidated before the war. It could be that if a final US/Iran peace deal is reached, that would be a catalyst for even lower prices.
In the Forex market, the US Dollar rose again to reach a new 13-month high, with notable gains for the Dollar against European currencies. The Dollar is likely to remain strong on a more hawkish Fed outlook since last' week's policy meeting. The EUR/USD pair is in focus as trend traders will be looking to be short here after it made a technically significant bearish breakdown below $1.1400 to a new 14-month low. Trend traders will already be long of the USD/JPY currency pair after its strong bullish breakout to a 1-year+ high price. These two pairs have historically been the best to trade the US Dollar against, with GBP/USD and AUD/USD showing less long-term weakness.
Stock markets are mostly seeing recoveries today, most notably in Asia where the Japanese Nikkei 225 Index and the South Korean KOSPI Composite each rose by over 5%.
Precious metal such as Silver and Gold are still trading with bearish momentum, with both reaching 6-month low prices and Gold below the big round number at $4,000. Silver is down by more than 50% from its peak made earlier this year, with both metals getting hamered by the tighter US monetary conditions. Trend traders prepared to short commodities will also be interested to be short here. I do not like to short commodities or equity indices.
There will releases today of two important items of US economic data:
PCE Price Index, which is expected to rise by 0.3% month-on-month and will be closely watched by the Fed, so any surprise could move the US Dollar and the US stock market too.
Final GDP (less important) which is expected to show growth of 1.6% anualised.