USD Dives Commodities Rise as ISM Manufacturing Rallies
As the ISM is a leading indicator for growth it also brings inflationary expectations, which benefits commodity prices and weakens the dollar.
The ISM Manufacturing index hit a 2.5 year high and expanded at its fastest pace since August 2018. At 60.7 in December versus 57.5 in November, it far exceeded estimates of 56.6 and suggests good producers are rebounding despite the potential for economic restrictions to reappear should the US not take control of COVID-19.
As the ISM is a leading indicator for growth it also brings inflationary expectations, which benefits commodity prices and weakens the dollar. The Thomson Reuters CRB commodities index hit its highest level since February 2020 and was also helped higher by a weaker USD dollar which remains anchored to its lowest levels since April 2018.
Commodity FX (AUD and NZD) led the pack with AUD/USD and NZD/USD gaining 1.3% and 1.1% respectively. Oil prices also helped support the index although a baulk of the move came from the OPEC agreement later in the session.
Oil Prices Rally to a 10-Month High as OPEC members Break Deadlock
On day two of the OPEC meeting, Saudi Arabia agreed to cut an additional one million barrels of oil per day in February and March. The move is beyond their original plan to cut oil production and aims to support its own economy and the overall oil market. Meanwhile other OPEC members will keep production steady, although Russia and Zakakhstan will increased output by 75k barrels per day (combined) over February and March.
Brent (BRENT) prices jumped 5% and broke to a 10-month high on the back of the news amid its most bullish session in nearly 8 weeks. The 20-day eMA is providing support and the daily trend remains bullish above the 50.57 swing low. Resistance has been found around the 3rd March high at 53.80, although the technical and fundamental picture appear to favour a breakout, so long as price remains above 50.57. WTI (WTI) is now back above $50 per barrel after rallying 4.9% its the daily trend remains bullish above 46.20.
Results Pending for Georgia Senate Runoffs, Indices Tread Water
With two Senate seats up for grabs, Republicans need to secure just one to retain their senate majority. And that could be bearish for equities.
US indices pared losses from Monday but traders clearly remain cautious ahead of the results. The S&P 500 (US500) and Nasdaq 100 (USTEC) recouped 0.8% of Monday’s sell-off and the Dow Jones recouped 0.6%, meaning all three have produced small bullish inside candles for the day.
With two Senate seats up for grabs, Republicans need to secure just one to retain their Senate majority. And that could be bearish for equities. According to a poll by fivethirtyeight.com Democratic contender Jon Ossoff holds a 1.8 point lead over Republican Senator David Perdue. Yet with Ossoff’s 49.1% versus Perdue’s 47.4% share of the votes there is no clear majority and it remains a tight race. The second seat up for grabs is Republican Senator Kelly Loeffler against Democrat contender Raphael Warnock, as former Republican Senator Johnny Isakson resigned. At the time of writing, Democrat Warnock leads by 2.1 points but, again, neither candidate has over 50% and it also remains a tight race.
But we can expect some movement on US indices when the results are released. The Nasdaq 100 (USTEC) has found resistance around 12,790 (lows of Wednesday – Friday last week) so this is a pivotal area for traders to focus on. Simply put, a Democratic win should see prices break above this pivotal area and retest (and potentially break above) record highs at 12,956. Should Republicans hold the Senate we would expect bears to return and break prices to fresh weekly lows. Next major support is around 12,220 – 12,300 where a prominent swing low and the 50-day eMA reside.
Polls are due to close at 19:00 EST (11:00 AEDT) so we should hopefully et the result after lunch or before UK markets open.
US Regulators Paving the Way for Banks to Implement Blockchain?
Despite yesterday’s volatile and bearish session, spot bitcoin (BTCUSD) prices recovered 8.7% from yesterday’s close after US regulators suggested banks may be able to use stablecoins for payments and other activities.
The federal banking regulator, OCC (Office of the Comptroller of the Currency), released an interpretive letter saying blockchain networks “may be more resilient than other payment networks” and that financial institutions participate as nodes on a blockchain and store or validate payments. Although as one would expect, their press release warned that any participating banks must be fully aware of fraud risks and operational compliance.
After stopping just shy of $35k on Monday and then falling to 28,450 yesterday, the 10-day eMA continues to provide support for bitcoin (BTCUSD) on the daily charts and now hovers around 33,800, just below record highs.