Hello Prop Traders! š
Today, weāre focusing on Brent Crude Oil and the AUD/USD pair. Both are showing significant market movements amid global economic developments. From increased oil production to positive employment data, these key trends will shape trading opportunities in the coming weeks.
š¢ļø Brent Crude Oil: IEA Expects Oil Supply to Increase, But Will Prices Follow?
Market Overview
As of mid-September 2024, the prices for Brent Crude Oil remain volatile. After a significant dip to $72.00, the benchmark grade is currently correcting within an upward channel, holding slightly above $73.00. Recent reports from the International Energy Agency (IEA)Ā indicate that most OPEC+ countries, notably RussiaĀ and Saudi Arabia, have exceeded oil production limits, pushing their combined output to 41.46M barrels/day, above their agreed quotas of 40.54M barrels/day. Additionally, non-OPEC producers have also ramped up production, adding to the surplus.
The IEA expects the global oil supply to grow by 0.6M barrels/dayĀ by the end of 2024, with further increases of 2.1M barrels/dayĀ anticipated by 2025. This oversupply could create significant downward pressure on Brent prices. If these trends persist, OPEC+ may revise production cuts to stabilize the market.
Despite this potential supply glut, Brent futures trading volumesĀ have significantly dropped, with daily trades falling to 920.0Kā930.0K, down from an average of 1.23Mā1.26MĀ contracts at the beginning of the month. This dip in trading activity signals reduced market liquidity and heightened volatility.
Recent Price Action and Technical Outlook
Technically, Brent Crude Oil is forming a short-term upward trend but remains below the correction channel marked between $85.00ā$73.00. Key resistance levels are seen at $73.20Ā and $77.00, while support lies at $71.20Ā and $68.75.
The Alligator IndicatorĀ shows a slowing of the sell signal, with the fast EMAs closing in on the signal line, suggesting a possible reversal. Additionally, the Awesome Oscillator (AO)Ā is displaying the first ascending bar, indicating a potential shift to the buy zone.
Trading Considerations
Bullish Scenario: If the price consolidates above $73.20, we could see a push towards $77.00, especially if geopolitical tensions and OPEC+ decisions lead to further supply tightening.
Bearish Scenario: If the price drops below $71.20, expect a retest of $68.75, especially if OPEC+ fails to enact new cuts in response to oversupply concerns.
š± AUD/USD: Moderate Uptrend Supported by U.S. Dollar Weakness
Market Overview
The AUD/USDĀ pair has been correcting upwards, trading around 0.6726Ā as of today. The Australian Dollarās rise is largely supported by negative dynamics in the U.S. Dollar, following a string of weaker-than-expected data out of the U.S. Meanwhile, Australian employment data in the tourism sectorĀ has provided a short-term boost to the Aussie currency.
In Q2 2024, 634.4K jobsĀ were registered in Australia's tourism sector, marking a modest decline of 1.8%Ā from Q1 but an improvement of 2% year-on-year. However, analysts predict that the employment figures will likely slow as the peak tourist season ends, which could drag on economic growth in the coming months. Other sectors of the economy, including sports and recreation, cafĆ©s and restaurants, and water and air transport, have also seen job cuts, which may weigh on the AUD moving forward.
On the U.S. side, the USD remains under pressure due to a rise in initial jobless claims, which increased to 230KĀ from 228KĀ the previous week. Additionally, the Producer Price Index (PPI)Ā rose by only 0.2% in August, while the annualized figure declined from 2.1%Ā to 1.7%. These figures point to a slowdown in inflation, which could further weaken the USD.
Technical Outlook
Technically, AUD/USD has returned to a moderate uptrend after completing a local reversal pattern, "head and shoulders," with the neckline around 0.6700. The Alligator IndicatorĀ is signaling a continuation of the buy trend, with fast EMAs widening above the signal line. Meanwhile, the AO histogramĀ has shifted into the buy zone, further supporting the bullish outlook.
Resistance levels are seen at 0.6740Ā and 0.6820, while key support is at 0.6690Ā and 0.6620. If the pair breaks through these resistance levels, further gains could be anticipated, but the ongoing slowdown in Chinaās economy may add downside risks.
Trading Considerations
Bullish Scenario: If AUD/USD breaks above 0.6740, the pair could rally towards 0.6820, driven by continued USD weakness and favorable Australian employment data.
Bearish Scenario: If the pair drops below 0.6690, expect further declines towards 0.6620, especially if China's economic concerns escalate and weigh on Australia's export outlook.
Conclusion: What to Watch for in Brent Crude Oil and AUD/USD
Both Brent Crude Oil and AUD/USD are at critical junctures. Brent prices remain highly sensitive to changes in OPEC+ policies and global supply dynamics, with an oversupply potentially driving prices down unless new production cuts are enforced. Traders should watch for key price levels around $73.20Ā and $71.20Ā for potential breakouts.
For AUD/USD, the pairās future performance hinges on continued USD weakness and Australia's employment data. Key resistance and support levels should guide trading decisions as the market digests macroeconomic trends in both the U.S. and Australia.
š Remember to assess all relevant factors and conduct thorough research before making any trading decisions.