Markets rise as reports of a US-China trade deal emerge
The price of crude oil continued the upward climb as a deal between China and the United States appeared close. On Friday, a report by Bloomberg said that the two countries were preparing the wording of a final report, which could be signed within weeks. A report by WSJ said that a deal was not far on the horizon, with China offering more US purchases with the goal of reducing deficit and the US offering to get rid of tariffs on Chinese goods.
Investors believe that a trade deal would help increase the demand for crude oil. However, both articles warn that Trump could change his mind at any time. In addition, production in the US appeared to be weakening. Last week, the API and EIA inventory data showed increased drawdowns. On Friday, data from Baker Hughes showed that oil rigs had declined from 853 to 843.
The AUD/USD pair rose sharply at the market’s open and then pared those gains. This was primarily because of the optimism in the US-China trade deal. Australia, being close to China in the Pacific, is one of the countries with the most exposure to China. For example, most of its iron ore is shipped to China. Therefore, if the Chinese economy sinks, Australia is usually very exposed. Earlier today, Australia released mixed economic data. The building approvals rose by 2.5% in January while the business inventories and gross operating profits of -0.2% and 0.8% missed the consensus estimates.
Sterling rose in overnight trading as the clock continues to tick towards March 29, when the United Kingdom is expected to leave the European Union. Investors are hoping that a no-deal Brexit scenario will be averted. The key scenario to watch will be an extension on Brexit by Theresa May. In a speech last week, the premier said that she will likely ask for a brief extension if her bill fails. However, the concern is that such a move will lead to more uncertainty. Today, the country will release data on housing PMIs, which is expected to show softening on the housing sector.
After rising initially, the EUR/USD pair pared some of those gains in early trading. The pair had reached a high of 1.1380 and then moved lower to the 1.1360 level. On the hourly chart, the pair is below the yellow diagonal support level shown and slightly above the white support level. The current price is slightly below the 21-day and 42-day EMAs. Today, the pair will likely remain in this consolidation level as traders wait for more details on trade.
On Friday, the AUD/USD pair reached the important support of 0.7070. The pair then started moving up, and today, it reached a high of 0.7105 and then started moving downwards. The current price is along the 21-day and 42-day EMAs while the RSI has remained along the 50s level. The pair could continue moving up, especially if there is an indication that a trade deal will be signed.
Last week, the price of crude oil fell sharply after Trump asked OPEC to intervene. After that, the price started to increase and by Friday, it had pared the previous losses. On Friday, the price declined sharply as traders took profits. Today, the price has moved higher as signs of a trade deal emerge and as US production reduces. The XBR/USD pair is currently at 65.30, which is higher than the low of 64.47. This price is slightly above the lower band of the Bollinger Bands while the signal line of the stochastics indicator is moving up. The pair will likely continue with the upward trend.