US crude futures are showing limited movement on Tuesday, continuing the trend which marked the Monday session. US crude is trading at $35.77 per barrel in the North American session. Brent crude futures are trading at $37.79, as the Brent premium has risen to $2.02. In economic news, the US trade deficit widened and missed expectations. ISM Non-Manufacturing PMI climbed to 54.3 points, slightly above the estimate. On the employment front, JOLTS Job Openings dropped to 5.45 million, well short of expectations.
US crude remains under pressure, and is currently trading at 4-week lows. We could see the commodity continue to drop, as oil prices remain under pressure due to a huge oversupply. On Wednesday, we’ll get a look at the weekly EIA Inventory reports. This indicator, which measures US crude stockpiles, has posted only one decline in 2016. Oil producers will meet in Qatar later in the month to discuss capping output, but it’s questionable if this meeting will be any more successful than previous attempts which led nowhere. Many OPEC nations have announced that they will not be attending, and crude output from OPEC rose in March, as members continue to adopt an “every man for himself” approach.
Last week’s US employment indicators pointed to a solid US labor market. Nonfarm Payrolls came in at 215 thousand, above the estimate of 205 thousand. The unemployment rate edged up to 5.0%. However, wage growth remains weak, as Average Hourly Earnings posted a small gain of 0.3%, close to the estimate of 0.2%. The markets will be treated to more employment data on Tuesday, with the release of JOLTS Jobs Openings. The estimate for February stands at 5.57 million, which would be an improvement from the previous month’s reading of 5.54 million. Solid job numbers are critical to continued economic expansion and are a key factor in the Fed’s decision-making process regarding another rate hike.
The US dollar posted broad losses last week, courtesy of a surprisingly dovish speech from Fed chair Janet Yellen in New York. Yellen warned of risks to the US economy from uncertainty in the global markets and the slowdown in China, and poured cold water on speculation of an April rate hike. Prior to her speech, several Fed members issued hawkish comments, some going as far as calling for a rate hike at the April policy meeting. The contradictory messages coming out of Fed points to a split in the FOMC concerning monetary policy, although Yellen is likely to have the last word. Analysts will be paying close attention to the Fed minutes on Wednesday, looking for clues as to further rate projections. The markets are hoping the minutes will provide some clarity about the Fed’s plans, after a week of mixed messages from the central bank. The release of the minutes should be treated as a market-mover, and we could see some volatility in the markets following this release.
Tuesday (April 5)
- 8:30 US Trade Balance. Estimate -46.3B. Actual -47.1B
- 9:45 US Final Services PMI. Estimate 51.0. Actual 51.3
- 10:00 US ISM Non-Manufacturing PMI. Estimate 54.1. Actual 54.3
- 10:00 US JOLTS Jobs Openings. Estimate 5.57M. Actual 5.45M
- 10:00 US IBD/TIPP Economic Optimism. Estimate 47.7. Actual 46.3
Upcoming Key Events
Wednesday (April 6)
- 14:00 FOMC Meeting Minutes
WTI/USD for Tuesday, April 5, 2016
WTI/USD April 5 at 10:45 DST
Open: 35.70 Low: 35.25 High: 35.86 Close: 35.77
- WTI/USD has shown limited movement throughout the day
- 35.09 is a weak support line
- 37.75 is a strong resistance line
Further levels in both directions:
- Below: 35.09, 32.22 and 27.55
- Above: 37.75, 40.00, 43.45 and 46.69
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