US Crude Under Pressure, Markets Eye Yellen Speech

US crude futures are lower on Tuesday following the downward trend of the Monday session. Crude is trading at $38.02 per  barrel  in the North American session. Brent crude futures are trading at $39.07, for a premium of $1.05. In economic news, US CB Consumer Confidence beat expectations, posting a strong reading of 96.2 points. Later in the day, Federal Reserve Janet Yellen will deliver remarks at the Economic Club in New York City.

Consumer confidence levels are closely linked to consumer spending, so the markets were pleased with a strong CB Consumer Confidence reading. The key indicator jumped to 96.2 points, well above the estimate of 93.9 points. The positive news was especially timely, coming on the heels of two soft consumer indicators, Core PCE Price Index and Personal Spending. Both releases softened in February, posting weak gains of 0.1 percent. The market focus will quickly shift to employment numbers, with the US releasing the ADP Nonfarm Payrolls on Wednesday, ahead of the official Nonfarm Payrolls report on Friday.

Following a dovish policy statement from the Federal Reserve, an interest rate hike did not seem likely in the next few months. However, a flurry of hawkish statements from Federal Reserve members last week has raised market-implied probability of a hike in April and resulted in broad gains for the dollar. The markets will be looking for some guidance from Fed chair Janet Yellen, who will make a speech in New York later on Tuesday. If Yellen does not rule out an April move, speculation of an imminent rate hike will increase, and the US dollar could respond with broad gains.

US economic growth in the fourth quarter was respectable, but there are signs that we could see softer numbers for the first quarter of 2016. The Atlanta Fed downgraded its forecast for Q1 from 1.4 percent to 0.6 percent. The original forecast, released just last week, was lowered in response to a downgraded forecast of personal income and outlays by the US Bureau of Economic Analysis. US Final GDP for the fourth quarter rose 1.4 percent, above the estimate of 1.0 percent, but lower than the 2.0 percent gain in the third quarter. If US economic activity did in fact weaken in Q1, we could see the US dollar lose ground.

WTI/USD Fundamentals

Tuesday (March 29)

• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%. Actual 5.7%
• 10:00 US CB Consumer Confidence. Estimate 93.9. Actual 96.2
• 12:20 US Federal Reserve Chair Janet Yellen Speaks

Upcoming Key Events

Wednesday (March 30)

• 12:15 ADP Nonfarm Employment Change. Estimate 194K

WTI/USD for Tuesday, March 29, 2016

WTI/USD March 29 at 11:20 DST

Open: 38.99 Low: 38.00 High: 39.06 Close: 38.07

WTI/USD Technical

• 37.75 has weakened in support and could be tested in the North American session
• There is resistance at 40.00

Further levels in both directions:

• Below: 37.75, 35.09 and 32.22
• Above: 40.00, 43.45, 46.69 and 50.89

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.