The Strong Dollar is the Key to Everything

The price of oil rose on Monday, despite the slight strengthening of the US dollar: the EUR/USD and GBP/UDS pairs continue to correct. The former is approaching the 1.135 mark, trading at 1.1365; the latter is headed toward 1.295. After such rapid growth last week, it would be strange not to expect consolidation, but it seems that Tuesday’s trading may interfere with the decline in European currencies, since the United States is celebrating Independence Day.
Brent crude is trading above $49/barrel after Baker Hughes published the number of US drilling rigs on Friday: For the first time in 23 weeks, there was no growth. Instead the number of rigs fell by 2 from 758 to 756. Investors almost everywhere took this as a positive sign, which propped up trading on the majority of markets. Oil might strengthen even more on Tuesday, since the United States is taking a break: the target is at $49.50, which is just $0.25 away from the current value at the time of this writing.
North America’s WTI is also trading up after topping the $46.50/barrel mark. We think that it will gradually move toward $47 on Tuesday.

The slightly stronger dollar had a negative impact on gold, but boosted stock trading: gold edged down a little below $1,225, which takes us back to last year’s numbers. The demand for gold and reserve currencies may fall if the dollar strengthens moderately and investors start buying the stocks of various companies more eagerly. In the case of gold, investors apparently decided to take a break from risk, which returned gold to the middle of the $1,200-$1,250 price range, trending down.

Trading in the Asia-Pacific region closed mixed: The majority of indexes, including Japan’s Nikkei 225, ended moderately up amid a decline in the Japanese yen and a rise in a number of sectors. The USD/JPY pair is trading above 113 and apparently will keep heading in the same direction Tuesday, trying to reach the target of 113.45. Only some sectors in China declined, despite Monday’s positive news about the growth of business activity, which broke through 50 to 50.4. This suggests expanded activity in a number of sectors of the economy.

The strengthening dollar also boosted European trading: The majority of indexes settled up 1.16-1.48% on Monday amid the declining euro and some stabilization of the energy and extractive sectors. Even the FTSE 100 gained, but not as much, adding only about 0.81%. June’s construction activity data might nail down the success at 8:30 am GMT on Tuesday.

It is also worth remembering that we won’t see US trading until Wednesday because of the holiday. Nevertheless, investors are eagerly awaiting Friday’s unemployment data and will likely take the lack of news for 2 days in stride.

Yuri Prokudin, Olymp Trade analyst.

Olymp Trade Review