Today was a relatively quiet day in the markets after Friday’s volatile session. Most of the price action appeared to be related to position-squaring following the release of the stronger-than-expected U.S. Non-Farm Payrolls report on Friday.
There were a few minor reports, but the key focus for investors is the G7 Meetings. With the U.S. labor report out of the way, traders will also be looking for new developments regarding Greece and its creditors. Investors remain optimistic that a resolution will be reached shortly. This may be the primary reason behind the technical bounce by the EUR/USD.
Earlier today, German Industrial Production bested the estimate 0.9% to 0.6%. The German Trade Balance was 22.3 billion versus the estimate of 18.1 billion. The Sentix Investor confidence report showed a decline from 19.6 to 17.1. Investors had priced in a reading of 18.9.
Oversold conditions contributed to a technical bounce by the GBP/USD. British Pound traders are also optimistic that a turnaround in the Euro Zone economy will have a spillover effect on the U.K. economy. There were no major reports today but early tomorrow, investors will get the opportunity to react to the latest BRC Retail Sales Monitor report. Last month, the report showed a decline of 2.4%.
The weaker U.S. Dollar helped contribute to a slightly higher August Comex Gold market. The main trend is down so most of today’s rally was likely related to position-squaring and oversold conditions caused by Friday’s sharp sell-off. Gold has been particularly sensitive lately to rising U.S. interest rates. Look for support for gold to continue to erode if U.S. Treasury yields continue to rise. This is because gold doesn’t pay a dividend or interest, thereby making it a less-attractive investment.
July Crude Oil futures broke sharply on Friday, but found support on a 50% level at $56.97 and slightly above the previous main bottom at $56.51. Buyers came in after OPEC delivered the news that many traders had expected, leading to a late-session short-covering rally and reversal to the upside.
Today, there was no follow-through to the upside and the market traded mostly lower. The major concerns for traders today are OPEC’s decision to maintain its currently high production levels and the news of a sharp drop in China’s fuel imports. Both events suggest the market will remain oversupplied throughout the year.
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