US Dollar Weekly Technical Forecast: Can USD Bulls Post a Breakout?

US DOLLAR TALKING POINTS:

US Dollar Price Action Setups: EUR/USD, USD/JPY and USD/CHF.

US Dollar Weekly Price Outlook: DXY Rally at Risk into Yearly Highs.

US Dollar Holds Ground as NFP Prints 196k for March US Jobs Report.

Retail Bets Against a USD Breakout via EUR/USD, GBP/USD

Retail traders appear to be looking for USD-weakness to show in Q2, as IG Client Sentiment is currently showing heavy long positioning in both EUR/USD and GBP/USD. Retail sentiment is traditionally a contrarian type of indicator, and this can keep focus on the bullish backdrop around the US Dollar as the quarter’s first major rate decision is on the economic calendar for next week with Thursday’s ECB meeting.

Do you want to see how retail traders are currently positioned around the US Dollar? Check out our IG Client Sentiment Indicator.

This was the driver last month that really seemed to prod USD-bulls, creating a swell of strength until the US Dollar tested the yearly-high at 97.71. But, that resistance came into play just hours after the ECB announcement; and the following morning brought an abysmal NFP report that saw that theme of USD-strength further reverse – and that remained into the FOMC rate decision on March 20th. The Fed went dovish by cutting forecasts for rate hikes in 2019, and that brought a quick continuation of weakness in the Greenback as prices pushed down to trend-line support. But – buyers were able to hold the lows, and in the two-and-a-half weeks since, have largely remained in-control of USD price action.

US Dollar Four-Hour Price Chart

USD

Chart prepared by James Stanley

As discussed in the Q2 technical forecast on the US Dollar, the currency has built into an ascending triangle formation, and this will often be approached in a bullish manner. The expectation is that the motivation that’s continued to bring in bulls at higher-lows, similar to what was seen in the aftermath of the March FOMC rate decision, will continue until resistance is eventually taken-out. This is one of the primary reasons for the bullish forecast on the US Dollar for Q2, and this potential remains until that formation is invalidated, which would take place upon a drop below March support around 95.74.

Access the DailyFX Q2 Forecasts for USD, Euro, GBP and More

US Dollar Daily Price Chart

USD

Chart prepared by James Stanley

US Dollar Forecast for Next Week: Neutral

While longer-term bullish potential remains around the US Dollar, this may not be the most opportune time to try to anticipate that breakout. At this point, given the rigidity of that resistance, USD is likely going to need some type of catalyst to create enough motivation for buyers to finally break through to the other side. Perhaps ECB is that catalyst; but given that the bank already triggered a fresh round of stimulus while cutting both growth and inflation forecasts, there may not be much more that they can do to create a bearish push in EURUSD, which could then create bullish breakout potential in the US Dollar. Or maybe it ends up being fears of a No-Deal Brexit that creates that swell of strength in the US Dollar as Cable traders punish GBP for another increase in uncertainty.

Whatever the root cause: Bullish breakouts above 97.71 in DXY can re-open the door for topside strategies in the US currency. But, until then, traders should remain on guard.

US Dollar Four-Hour Price Chart

USD

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

Other Weekly Technical Forecast:

Australian Dollar Forecast – AUD/USD Outlook Mixed, AUD/NZD and GBP/AUD Flirt with New Trends

Oil Forecast – Crude Oil Prices Hit Fresh 5-Month High with Eyes Glued on Dow and Risk

British Pound Forecast – GBPUSD & EURGBP Trends Creaking

The Wall Street Journal: Judge orders hearings to revive objections to al…









A federal judge on Friday said he wants to hear in court from witnesses who object to the Justice Department’s decision last year to approve CVS Health Corp.’s nearly $70 billion acquisition of Aetna Inc.—a highly unusual move that threatens to shake up the already-consummated deal.

U.S. District Judge Richard Leon in Washington, D.C., is reviewing a department settlement last fall that allowed the merger after the companies agreed to sell off assets related to Medicare drug coverage.

“This is a matter of great consequence to a lot of people,” Judge Leon said during a brief court hearing. Health care “is a high priority issue for tens of millions of families,” he added. The judge, a George W. Bush appointee, last December said he was concerned the department hadn’t adequately addressed broader potential competitive harms raised by the merger.

At the time, he didn’t halt CVS’s












CVS, +1.24%










  integration of the Aetna assets but made clear he wanted to spend additional time considering the settlement. CVS had volunteered to Judge Leon that it would keep parts of its Aetna operations separate until he did so.

A federal law called the Tunney Act requires the government to have proposed merger settlements approved by a federal court, which determines whether the deal is in the public interest.

An expanded version of this report appears on WSJ.com.

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Market Extra: Will an ‘unsustainable’ rally in stocks and bonds extend a …









For investors who followed a “sleep-easy” portfolio balanced between stocks and bonds, the twin-barreled rally in both assets in the first quarter of 2019 has delivered close to double-digit returns.

Yet market participants say these gains have led equities and debt yields to send wildly contradictory signals over the U.S. economy’s health, with the rise in equities indicating the recent slowdown will only remain a soft patch, even as the rise in bond prices and slide in yields imply a more pessimistic outlook for the rest of the year. This divergence between equities and yields goes against textbook finance theory, drawing questions of how long this benign environment for both risk and haven assets can last.

“The truth could be somewhere between what stocks and bonds are saying. But it’s unsustainable,” Franck Dixmier, head of global fixed-income at Allianz Global Investors, told MarketWatch.

See: The traditional stock-bond correlation disappeared in 2018, spelling trouble for investors

Analysts say the driver for these investment riches has been a dramatic breakdown of the positive correlation between stocks and bond yields in 2019 – when equities rise, bond prices fall, pushing yields higher. A positive correlation reflects when two indicators move in sync, while a negative correlation shows when they move in opposite directions.

Opinion: Stocks predict boom, bonds predict gloom, — which signal should you believe?

Bonds and equities have rebounded in 2019 after a torrid end to last year, delivering double-digit gains in the best quarter for a so-called 60/40 portfolio since the financial crisis. A balanced fund putting 60% of its assets in the S&P 500 index












SPX, +0.46%










and 40% in 10-year Treasury notes












TMUBMUSD10Y, -0.75%










posted a return of around 10% in the first three months of 2019, according to Arbor Research & Trading.

The S&P 500 is up more than 15% this year, while the 10-year Treasury yield is down nearly 20 basis points, and more than 70 basis points lower since the benchmark bond rate hit multiyear highs in November. But since late March, yields have mounted a steady comeback, climbing to 2.50% from a more than two-year low of 2.39%. Bond prices move inversely to yields.

“Deeply negative correlation between U.S. equities and Treasuries has produced heyday conditions for the balanced portfolio,” wrote Ben Breitholtz, an analyst at Arbor Data Science.

Balanced funds are built upon the foundation of a positive correlation between prices of stocks and bond yields, with the idea being that weakness in one corner of the portfolio will be offset by strength in the other, hence the sleep-easy label.

That hasn’t prevented balanced funds and 401K plans from taking advantage of the double-barreled rally, even as it leaves much of Wall Street confused, unsure as to whether bonds or stocks are right on the economic outlook.

Breitholtz said, however, the predictive powers of government debt yields and equities are over-rated, with both showing a poor track record in predicting where U.S. growth is headed.

In the chart below, he shows both the implied yearly growth rate from both the S&P 500 and Treasury yields are often unmoored from the yearly growth readings of the U.S. gross domestic product.


















Moreover, the mixed signals are unlikely to last if only because history shows times when stocks are rising and yields are falling cannot endure for extended periods, even if they do occur quite often. Analysts at Société Générale found 44% of quarterly periods since 1988 have seen both global bond and equity markets rally.

To be sure, Breitholtz said periods when both assets thrive usually occur when the central bank refrains from signaling and carrying out further policy shifts, very much the environment investors are in now.

After the central bank indicated it would pause on further rate moves in January, the Fed cut its expectations for interest-rate hikes in 2019 to none in the March meeting, from a previous forecast of two in December.

This dovish double-down sent yields plummeting to the point that the 2-year Treasury note yield












TMUBMUSD02Y, -0.16%










 , sensitive to the outlook for Fed policy, now currently trades a few basis points below the overnight fed funds rate, indicating bond buyers currently see monetary easing more likely than tightening.

But with economic data in China and the U.S. expected to stabilize in the second half of the year, bond markets may not be able to count on continued Fed inaction, especially if inflation begins to percolate back into the economy. That could finally realign yields with the stock market’s rising trajectory, said Dec Mullarkey, managing director of investment strategies at Sun Life Investment Management.

Things to watch out next week

Looking ahead, investors will get a handle on March’s consumer price readings on Wednesday, along with the minutes from the Federal Open Market Committee’s March meeting. The minutes could reveal under what conditions the Fed could break away from their patient stance.

The European Central Bank will also hold a meeting on Wednesday. The ECB has faced a deterioration of economic data, including a weaker-than-expected German industrial orders this week.

British Prime Minister U.K. Theresa May will return to Brussels to press for another extension to Brexit. Without a delay, the U.K. is due to leave on April 12.























Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.

Sunny Oh is a MarketWatch fixed-income reporter based in New York.


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NewsWatch: ‘How is this possible?’ Analysts puzzle over stock market’s ra…

MARKETWATCH FRONT PAGE

U.S. equity funds have seen billions in outflows year-to-date, even as stocks are near records. See full story.

About half of teens can’t pass this basic 8-question financial quiz. Could you?

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This is what happens when your plans for early retirement are derailed. See full story.

Cisco finds dozens of open-air groups peddling cybercrimes to 385,000 users on Facebook

Cisco Systems Inc.’s security research group Talos said Friday that groups of cybercriminals continue to use Facebook Inc. as an open-air market to sell their services. See full story.

Boeing stock gains in the week as crash report fuels Wall Street optimism

Boeing shares gain 3% this week as Wall Street reacts to an initial report pointing to a common cause between the two 737 Max fatal crashes and likes that Boeing’s solution appears to address both. See full story.

MARKETWATCH PERSONAL FINANCE

Friday’s top personal finance stories See full story.












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Sterling Weekly Technical Outlook: GBPUSD & EURGBP Trends Creaking

Sterling FX-Pairs Technical Analysis

  • GBPUSD stuck below trend resistance after recent break.
  • EURGBP pushed up through recent downtrend.

Looking for a fundamental perspective on GBP? Check out the Weekly GBP Fundamental Forecast.

Q1 Trading Forecasts for a wide range of Currencies and Commodities, including GBPUSD and EURGBP with our fundamental and technical medium-term technical outlook.

How to Combine Fundamental and Technical Analysis.

GBPUSD remains above the 1.3000 handle but is finding further upside increasingly difficult after the 2019 trendline turned from support to resistance over the last few sessions. A new downtrend is in place off the March 13 high at 1.3383 and this may hold sway over the next few days unless there is a fundamental shift in ongoing Brexit talks. An interesting confluence of technical indicators is on the cards at the start of next week when the 2019 uptrend meets the recent downtrend and 38.2% Fibonacci retracement around the 1.3175 level. If this level continues to weigh on GBPUSD, then support will start between 1.2980 and 1.3000, ahead of the 200-day moving average – currently at 1.2955 – before the 23.6% Fib retracement comes into play at 1.2894.Support may come from the CCI indicator which is starting to flash an oversold signal around the -100 level.

GBPUSD Daily Price Chart (June 2018 – April 5, 2019)

GBPUSD

Today’ break of the downtrend from March 21 has left EURGBP in position to move slightly higher but overhead resistance should keep the move in check, all Brexit things being equal. Today’s move higher has also seen the 0.8624 Fibonacci retracement level traded and a close above here would bring in the 0.8671 – 0.8675 level into play before 0.8718 – Fibonacci 38.2% – and the March 21 high at 0.8723 come into play. These levels look likely to hold in the short-term, aided as well by the CCI indicator that is nearing overbought territory. To move lower a close below the recent downtrend will bring into play 0.8518 ahead of 0.8503 and 0.8482 and the multi-month low at 0.8472.

Central Bank Intervention in the Foreign Exchange Market.

EURGBP Daily Price Chart (October 2018 – April 5, 2019)

EURGBP

How Central Banks Impact the Forex Market

DailyFX has a vast amount of resources to help traders make more informed decisions. These include a fully updated Economic Calendar, and a raft of constantly updated Educational and Trading Guides

— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

Other Weekly Technical Forecast:

Australian Dollar Forecast – AUD/USD Outlook Mixed, AUD/NZD and GBP/AUD Flirt with New Trends

Oil Forecast – Crude Oil Prices Hit Fresh 5-Month High with Eyes Glued on Dow and Risk

Sterling (GBP) Fundamental Outlook: Leaning Towards a Softer Brexit?

gbpusd

Sterling (GBP) Talking Points: Brexit

  • New cross-party alliance; no deal Brexit now highly unlikely
  • A potential one-year Article 50. extension could see a second Brexit vote put to the public.

The DailyFX Q2 GBP Forecasts are available to download including our short- and medium-term look at Sterling.

Fundamental Forecast for GBP: Neutral

UK Prime Minister Theresa May this week reached out to the leader of the Opposition Jeremy Corbyn in a renewed attempt to break the current Brexit deadlock. The cross-party talks were said to have been constructive but inconclusive but the olive branch from the PM while angering some of her Party is seen by many as finding a way to leave the EU, however ‘soft’ the plan is. This week also saw Parliament vote for a bill to stop the UK from leaving the EU without a deal although as yet this is not a legal position. And to end the week, UK PM May asked the EU for an extension to Article 50. until June 30 to help break the deadlock. In response, the EU is expected to turn down this request and instead offer the UK a one-year ’flexible extension’ with the inclusion of a break clause if the UK ratifies a deal with the EU.

This week’s moves point towards a softer Brexit outcome although there is still a possibility of a General Election that could spark volatility. GBPUSD seemingly remain bid around the 1.3000 level but despite the positive news the current – small – soft Brexit premium built into Sterling is being gently eroded. It may be that Sterling traders are starting to tire of this whole process and see a one-year ‘flextension’ as more of the same. While Sterling is one of the most popular trading currencies, there may be better opportunities elsewhere in the FX market where fundamentals are clearer and, more importantly, where chatter matters less.

The UK data calendar is quiet next week apart from Wednesday when trade balance data, industrial and manufacturing figures and the latest look at monthly and 3m/3m GDP are all released at 08:30 GMT. EURGBP traders will also be interested in the latest ECB monetary policy meeting on the same day and President Draghi’s press conference afterwards.

DailyFX Economic Calendar

GBPUSD Daily Price Chart (June 2018 – April 5, 2019)

Please add a description for the image.

IG Client Sentiment data show 70.0% of traders are net-long GBPUSD. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggest that GBPUSD prices may fall. However, if we factor in recent daily and weekly positional changes, we get astronger GBPUSD bearish trading bias.

Traders may be interested in two of our trading guides, especially in times of volatilityTraits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – Australian Dollar Could Ride US-China Trade Hopes Higher Again

Oil Forecast– Crude Oil Prices Risk Fresh 2019 Highs as RSI Sits in Overbought Territory

Crude Oil Prices Risk Fresh 2019 Highs as RSI Sits in Overbought Territor…

crude oil

Crude Oil Price Talking Points

Crude remains bid despite an unexpected jump in U.S. inventories, and oil prices may trade higher over the coming days as the Organization of the Petroleum Exporting Countries (OPEC) and its allies continue to regulate the energy market, while the Relative Strength Index (RSI) sits in overbought territory for the first time in 2019.

Fundamental Forecast for Crude Oil: Bullish

Current market conditions may keep oil prices afloat ahead of OPEC’s Joint Ministerial Monitory Committee (JMMC) meeting on May 19 as Secretary General Mohammad Barkindoinsists that the ‘Declaration of Cooperation’ has helped to ‘return balance to the market and reintroduced a long-absent element of stability.

Crude oil

The comments suggest OPEC and its allies are in no rush to boost production even though U.S. Crude Inventories jumped 7,238K in the week ending March 29, and the group may curb oil output beyond the June deadline as the updates from the U.S. Energy Information Administration (EIA) show weekly field production of crude oil climbing to a fresh record of 12,200K b/d during the same period.

However, recent comments coming out of Russia suggest the region is reluctant to extend the OPEC+ alliance as Energy Minister Alexander Novak argues that ‘it’s tooearly to say whether the deal will be extended,’ and U.S. President Donald Trump may continue to respond to rising energy prices as he tweets ‘world markets are fragile, price of oil getting too high.

It remains to be seen if the U.S. and China, the two largest consumers of oil, will reach a trade deal over the coming days as President Trump insists that ‘the China and USMCA deals are moving along nicely,’ and OPEC and its allies may find it increasingly difficult to defend the extraordinary efforts aimed at rebalancing the energy market as the most recent Monthly Oil Market Report (MOMR) notes that ‘world oil demand is forecast to grow by 1.24 mb/d, unchanged from last month’s projections.

With that said, oil prices may trade to fresh yearly highs as crude continues to track the upward trending channel from late-2018, and the bullish momentum appears to be gathering pace as the Relative Strength Index (RSI) highlights similar dynamic, with the oscillator sitting in overbought territory for the first time in 2019. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

CL1 Daily Chart

CL1

Looking for a technical perspective on oil? Check out the Weekly Oil Technical Forecast.

Crude extends the advance from the 2018-low ($42.36) following the failed attempt to close below the $55.10 (61.8% expansion) to $55.60 (61.8% retracement) area, with the price for oil coming up against the Fibonacci overlap around $62.70 (61.8% retracement) to $63.70 (38.2% retracement).

Need a break/close above the overlap to bring the $64.90 (100% expansion) to $65.90 (78.6% retracement) area on the radar, with the next topside region of interest coming in around $68.80 (23.6% retracement) to $69.20 (50% retracement).

Will keep a close eye on the RSI as it sits in overbought territory for the first time in 2019, but may see a textbook sell-signal emerge should the oscillator fall below 70, which may spur a move back towards the $59.00 (61.8% retracement) to $59.70 (50% retracement) area.

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other markets the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – Australian Dollar Could Ride US-China Trade Hopes Higher Again

Crude Oil Prices Hit Fresh 5-Month High with Eyes Glued on Dow and Risk

Crude Oil Technicals Talking Points:

Looking for a fundamental perspective on Crude oil? Check out the Weekly Crude Oil Fundamental Forecast.

Technical Forecast for Crude Oil Prices: Neutral

The first week of the second quarter offered a very favorable wind for crude. Starting with this past Monday’s lurch higher – earning a decisive break above 60.25 on the biggest single-day rally in two-and-a-half months – the period would eventually offer 5.2 percent advance that clears out further technical levels that different traders would assign different weighting. There was some historical precedence in the 63 level that we cleared on Friday as the 61.8% Fibonacci retracement of the historic range over the past three-plus decades. But how many people are truly monitoring that level? The answer to that question is important in establishing how much speculative charge we can muster from merely passing through a level rather than finding some fundamental source of demand. Looking further above, the 61.8% retracement of the October to November slump stands at 63.65 and the 64.50 area is roughly the support established through the past summer. I don’t assign much weight to either milestone. Instead, I’m more concerned with the pacing in momentum and the external motivations of risk appetite.

Chart of US Crude Oil with 1 Period Rate of Change (Quarterly)

Crude

Zooming out to take stock of momentum behind this commodity, we find that all of 2019 is essentially a ‘recovery’ phase to a much more intense tumble through the fourth quarter of the previous year. Nevertheless, that rebound has proven consistent and productive. Thirteen of the last nineteen weeks have been positive for the market and that includes the five consecutive weeks of advance that concluded this Friday. That matches the longest series back to the first two weeks of 2018 and we haven’t had a six week or greater climb since March 2016. That is a remarkable picture and looks very similar in structure to what we saw in early 2016: the initial phase of a recovery effort. That said, we are not mounting a recovery from a multi-year bear phase.

Chart of an US Crude Oil and Consecutive Candles (1-Week)

Crude

Where momentum on the higher time frame is uneven, the market continues to earn short-term victories for the bulls which is proving valuable as the progress clearly comes in stage. In the four-hour chart below, you can see that much of the advance is being made in short but intense phases around technical breaks. This past week, we were developing a symmetrical wedge pattern – or a bullish pennant – which secured its break before the close above the top of the short-term congestion portion which happened to coincide with the longer-term Fibonacci level reflected alone. Short of an external tidal wave of speculative interest that lifts of crushes this market along with many others, we are likely to see considerable start-and-stop activity around notable levels.

Chart of an US Crude Oil (4-Hour)

Crude 4hr Chart

As you monitor oil’s progress, keep tabs on its pacing. It is natural to see activity – both realized and expected – to settle when a market with a positive correlation to risk trends advances. You can see below the 20-day ATR (in red) which reflects volatility in actual price action and the CBOE’s oil volatility index (in green) which derives anticipation through options are both dropping to quiet levels. This is not unique to crude by any stretch, but it is very often the foundation for staging a dramatic reversal in activity levels. It reflects the lull and lack of preparation that builds into a trend. In practical terms, it means that further climb will more likely be throttled relative to the potential intensity of any reversal that drive us back below 60 – the channel support that could seriously undermine intention.

US Crude Oil with 50-day Moving Averages, 20-day ATR and CBOE’s Oil Volatility Index (Daily)

Crude Oil with 50 day Moving Average

Not shown in the charts here, we are certainly starting to see some stretch to raise contrarian concerns. Alongside momentum flagging, we have measures like the RSI showing such consistency has pushed us into an oversold position. That doesn’t suggest we are going to immediately reverse course, but this concern will float in the background. Meanwhile, we need to also keep tabs on some of the external influences in the market. Below you can see each of the times US President Donald Trump has weighed in on the level of the commodity (stating it is too high) via Twitter. His track record for turn the market is not strong, however, it can generate volatility. And if the market is already starting to waver, volatility can sometimes prove to match that starts the fire.

US Crude Oil with 50-day and 200-day Moving Averages (Daily)

US Crude Oil

A much more systemically-important influence for crude oil is its general connection to ‘risk trends’. For those monitoring fundamental influences, the headlines from the US President and OPEC are of questionable effect. Yet, when there is a broad rise in anything with a speculative lean to it – like the S&P 500 or other US equity index – we find crude is usually following along. Below, the correlation between the S&P 500 and Oil can be seen in the overlaid charts, but the consistency is best appreciated in the statistical reading. The rolling 20-day correlation is extraordinarily high and has remained that way throughout the ‘recovery’ phase in 2019.

US Crude Oil with S&P 500 and 20-Day Correlation Coefficient (Daily)

Crude & S&P 500 & 20 - Day Correlation

In determining continuation or reversal, one of the most prescient aspect to the market is positioning. Looking to the most recent CFTC Commitment of Traders’ figures, net speculative futures traders continue to drive into the recovery effort with seven consecutive weeks in which the crowd has increased its net long position. There is still considerable ways to go before we return to the record highs in long exposure from last year, but that is unlikely to occur. The 2018 peak in net positioning contrasted dramatically with the relative level of the underlying market. That recognition will likely play a roll in commitment moving forward. As for short-term interests, the retail side (via CFDs) is increasingly fighting the trend. The build up in short total orders is not climbing aggressively, but the net short-view is increasing as participation form the long side dries up. Retail traders tend to do better in range/congestion markets and fight aggressively the establishment of trends.

Chart of Net Speculative Positioning in Crude Oil Positions from CFTC Report (Weekly)

Net Speculative

Chart of Retail Trader Positioning from IG Clients (Daily)

Crude

Other Weekly Technical Forecasts:

Australian Dollar Forecast – AUD/USD Outlook Mixed, AUD/NZD and GBP/AUD Flirt with New Trends

Crude Oil Prices Risk Fresh 2019 Highs as RSI Sits in Overbought Territory

crude oil

Crude Oil Price Talking Points

Crude remains bid despite an unexpected jump in U.S. inventories, and oil prices may trade higher over the coming days as the Organization of the Petroleum Exporting Countries (OPEC) and its allies continue to regulate the energy market, while the Relative Strength Index (RSI) sits in overbought territory for the first time in 2019.

Fundamental Forecast for Crude Oil: Bullish

Current market conditions may keep oil prices afloat ahead of OPEC’s Joint Ministerial Monitory Committee (JMMC) meeting on May 19 as Secretary General Mohammad Barkindoinsists that the ‘Declaration of Cooperation’ has helped to ‘return balance to the market and reintroduced a long-absent element of stability.

Crude oil

The comments suggest OPEC and its allies are in no rush to boost production even though U.S. Crude Inventories jumped 7,238K in the week ending March 29, and the group may curb oil output beyond the June deadline as the updates from the U.S. Energy Information Administration (EIA) show weekly field production of crude oil climbing to a fresh record of 12,200K b/d during the same period.

However, recent comments coming out of Russia suggest the region is reluctant to extend the OPEC+ alliance as Energy Minister Alexander Novak argues that ‘it’s tooearly to say whether the deal will be extended,’ and U.S. President Donald Trump may continue to respond to rising energy prices as he tweets ‘world markets are fragile, price of oil getting too high.

It remains to be seen if the U.S. and China, the two largest consumers of oil, will reach a trade deal over the coming days as President Trump insists that ‘the China and USMCA deals are moving along nicely,’ and OPEC and its allies may find it increasingly difficult to defend the extraordinary efforts aimed at rebalancing the energy market as the most recent Monthly Oil Market Report (MOMR) notes that ‘world oil demand is forecast to grow by 1.24 mb/d, unchanged from last month’s projections.

With that said, oil prices may trade to fresh yearly highs as crude continues to track the upward trending channel from late-2018, and the bullish momentum appears to be gathering pace as the Relative Strength Index (RSI) highlights similar dynamic, with the oscillator sitting in overbought territory for the first time in 2019. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

CL1 Daily Chart

CL1

Looking for a technical perspective on oil? Check out the Weekly Oil Technical Forecast.

Crude extends the advance from the 2018-low ($42.36) following the failed attempt to close below the $55.10 (61.8% expansion) to $55.60 (61.8% retracement) area, with the price for oil coming up against the Fibonacci overlap around $62.70 (61.8% retracement) to $63.70 (38.2% retracement).

Need a break/close above the overlap to bring the $64.90 (100% expansion) to $65.90 (78.6% retracement) area on the radar, with the next topside region of interest coming in around $68.80 (23.6% retracement) to $69.20 (50% retracement).

Will keep a close eye on the RSI as it sits in overbought territory for the first time in 2019, but may see a textbook sell-signal emerge should the oscillator fall below 70, which may spur a move back towards the $59.00 (61.8% retracement) to $59.70 (50% retracement) area.

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other markets the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – Australian Dollar Could Ride US-China Trade Hopes Higher Again