Emerging temporary calm in the Strait of Hormuz has seen crude oil open about 7% lower than its Friday close.
- Crude Oil has opened quite strongly lower after an anticipated wide US military offensive against Iran over the weekend did not materialise, and the low-level clashes have abated - at least for now. Many analysts, myself included, believe that the USA will sooner or later be forced into such an offensive, but with the prospect for now off the table, it has lowered risk-off sentiment somewhat, which manifests most notably in the price of crude oil. Stock markets are broadly higher, and the US Dollar is lower since the market open today.
- Markets are looking towards Wednesday's meeting of the US Federal Reserve, and according to the CME Fed Watch tool, are pricing in a 31% chance of a 0.25% rate hike. If the Fed does surprise the market and hike, expect sharply lower stock markets and a bullish breakout by the US Dollar Index beyond the resistance level at 101.39.
- President Trump is bringing a new wave of tariffs priced at between 10% and 12% into force to replace the earlier 10% tariff which was ruled unconstitutional by the US Supreme Court some time ago. The new tariffs are more complex, and a detailed examination is out of scope here but be aware these new tariffs could trigger volatility in Forex, commodities, and stocks, while also posing a longer-term inflation risk.
- In the Forex market, the Euro and the Swiss Franc have been the strongest major currencies since today's Tokyo open, while the Canadian Dollar has been the weakest, due to its typical positive correlation with the price of crude oil. The USD/JPY currency pair will probably continue to attract interest, as it reached a new 39-year high last week. I have been long for a while, and I am comfortable staying long despite the dip - I am using a wide stop loss and see this as a solid long-term trade.
- Gold and Silver have risen today, although the rise remains quite muted, but Gold seems to have finally broken out passively above its long-term descending trend line. If there is a strong bullish close, some traders will see this as a very speculative buy.
- There are no high-impact data releases due today, so it may be the quietest day of this week in the market.