Crude oil trades higher as Trump de-certifies Iran deal

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Fundamental outlook

CRUDE oil prices traded higher before weekend as US President Donald Trump de-certifies the Iran deal. US weekly claims for jobless benefits declined while inflation poised for a slow growth. China trade surplus declined while UK trade deficits widened to a record high from fear of the impact of the Brexit.

US weekly claims ended October 7 dropped to 243,000, the lowest in six weeks. Producer prices rose 0.4 per cent in September which was better than last month. Core prices, excluding food and energies, also grew 0.4 per cent, the best recorded in five months.

US consumer prices for September rose 0.5 per cent while core prices grew 0.1 per cent, both below forecast. Retail prices grew 1.6 per cent while core prices, excluding automobiles, rose one per cent.

Trump has de-certified Iran’s nuclear deal and is now working on a new deal to contain Iran. Crude oil prices traded higher before weekend closed as traders reckoned global production supply will decline.

China’s Caixin services index grew at 50.6 in September, the lowest recorded since January last year. China’s trade surplus grew 193 billion yuan in September and slid to the lowest in six months. Foreign direct investments grew 1.6 per cent compared with a year ago.

Japan’s current account surplus stayed positive in August at 2.27 trillion yen, the best recorded in 11 years. Core machinery orders rose 3.4 per cent, beating consensus’ expectations.

Business and consumer loans rose 0.3 per cent in September from a year ago, making steady growth. Producer prices also matched forecast at three per cent.

German industrial production including utilities and mines, rose 2.6 per cent in August, a good growth rate. The eurozone’s industrial production also rose 1.4 per cent, the highest in three months.

UK manufacturing production retained a good growth in August by rising 0.4 per cent above forecast. However, trade deficits widened to a record high at 14.2 billion pounds.

Technical forecast  

US dollar/Japanese yen traded lower as the yen is gradually strengthening. This week, the trend might swing to a sideways trend, testing the 111 support before a mild recovery. The range is expected to move tightly from 111 to 112.50 region while waiting for Japan’s election on October 22.

Euro/US dollar activity slowed down as the Catalan fiasco simmers down. This week, we predict the trend could move sideways, moderately. The range might stretch from 1.175 to 1.195 region amid mixed sentiments.

British pound/US dollar has met resistances at 1.3320 after UK failed to negotiate a two-year extension for the Brexit with the European Union. While traders are still hoping for the best outcome, we reckoned the trend will thread sideways this week from 1.31 to 1.3350 in a narrow range until the dust settles.

 

Disclaimer: This article is written for general information only. No liability by the writer, publisher or any third party involved in the distribution of this work. Dar Wong is a registered fund manager in Singapore with 28 years of global trading experiences. You may reach him at [email protected].