Volatile Crude Flirts With $40 Line

US Crude is showing strong movement on Monday, as the pair trades at $42.42 a barrel in the European session. Oil was trading close to $40 a day earlier on Monday, but shot higher after Saudi Arabia said that it was ready to work with other producing and exporting countries in order to stabilize oil prices. It’s a quiet start to the week on the release front, as the US releases Manufacturing PMI and Housing Starts. On Tuesday, there are two key releases – Preliminary GDP and CB Consumer Confidence.

Last week’s Fed minutes did not confirm a December rate hike, but most analysts feel that the long-awaited move will indeed occur next month. Market expectations have risen to 66% that the Fed will make a move next month, and recent comments by Fed policymakers have hinted that a rate move is a strong possibility. At the past two policy meetings, the vote against a rate hike was 9-1, but that clearly will not be the outcome at the December meeting. With the US economy showing improvement and employment and consumer indicators pointing upwards, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that a modest move would not cause unwanted turbulence on the global markets. One remaining question mark in the rate move puzzle is that of inflation levels. Recent inflation readings have been weak, and the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. The markets will get a look at key inflation indicators shortly before the critical Fed policy meeting on December 16.

The economic slowdown in China and other emerging countries continues to affect markets worldwide, and one of the damaging results has been a wide decline in commodity prices. Crude oil slipped below the symbolic $40 last week, marking the lowest prices we’ve seen since August. Oil prices have been hard-hit, as OPEC members and other oil producers continue to pump out oil at high levels, which has resulted in a global glut, as supply has far outstripped demand. If the current situation continues, analysts say that we could see oil drop below $30 a barrel as early as next year.

WTI/USD Fundamentals

Monday (Nov. 23)

• 14:45 US Flash Manufacturing PMI. Estimate 54.0 points
• 15:00 US Existing Home Sales. Estimate 5.39M

Upcoming Key Events

Tuesday (Nov. 24)

• 13:30 US Preliminary GDP. Estimate 2.0%
• 15:00 US CB Consumer Confidence. Estimate 99.3 points

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Monday, November 23, 2015

WTI/USD November 23 at 11:10 GMT

WTI/USD 41.94 H: 42.73 L: 40.41

XAU/USD Technical

• WTI/USD showed considerable losses in the Asian session but recovered in the European session.
• 39.87 is providing support.
• 42.59 was tested earlier and is a weak line of resistance.

Further levels in both directions:

• Below: 39.87, 37.75 and 35.09
• Above: 42.59, 44.30, 47.04 and 49.06

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.