Oil volatility rises as Trump predicts huge supply cuts
The price of crude oil spiked after Donald Trump reassured the market that Saudi Arabia and Russia were close to a deal that will cut more than 15 million barrels a day. This would be a substantial supply cut since the world’s demand stands at around 100 million barrels a day. Still, there are concerns about whether a deal between OPEC+ will be reached. For example, Russia rejected the claim that Putin had talked to Prince Mohammed. Also, it is unlikely that Saudi Arabia will accept supply cuts that don’t include major oil producers like Russia and the US.
The US dollar index paused ahead of the official nonfarm payrolls data from the US. The numbers will be released at 12:30 pm GMT. Economists polled by Bloomberg expect the economy to have lost more than 100k jobs in March as the Coronavirus pandemic accelerated. They also expect the unemployment rate to jump back to 3.8%. Wages too are expected to have risen by just 0.2%, which is lower than the previous 0.3%. Meanwhile, the average weekly hours are expected to have declined from 34.4 to 34.1. These numbers will come a day after the Labour Department released the tough jobless claims data that showed that more than 6.6 million Americans filed for unemployment benefits in the past week.
Another focus today will be on services PMI numbers, which will be released by Markit. These are important numbers because of how important the service sector is to the world economy. In Germany, the market expects that the services PMI dropped from 34.5 to 34.3 while in France, they expect the PMI to remain unchanged at 29.0. Meanwhile, in Italy, the epicenter of the disease, the PMI is expected to drop to 22.0 from the previous 52.1. In the UK, the PMI is expected to drop to 34.8 from the previous 35.7. In the US, the ISM non-manufacturing PMI data is expected to have dropped to 44.0 from the previous 57.3.
The EUR/USD pair dropped to an intraday low of 1.0820 as the market reacted to the employment data from the US. On the hourly chart, the pair dropped past the neckline of the head and shoulder pattern and reached the 38.2% Fibonacci Retracement level. The pair will likely see significant volatility ahead and after the job numbers are released.
The XBR/USD pair rose to an intraday high of 36.35 after the statement by Trump. This was the highest level it has been since March 16. It then declined to the current level of 29.79 as traders await a statement from Saudi and Russia. On the four-hour chart, the pair is trading above the 100-day and 50-day exponential moving average while volatility, as measured by the Average True Range (ATR), has continued to rise. The pair will remain to be volatile as the markets wait for more information.
The USD/CHF pair rose to an intraday high of 0.9750, which was slightly below the 61.8% Fibonacci Retracement level on the hourly chart. The pair is trading slightly above the 14-day and 28-day exponential moving averages while the RSI has edged below the overbought level of 70.As with the EUR/USD pair, the pair will likely see some more volatility ahead of the NFP data.