CRUDE OIL PRICE RETREATS AS CHINA CONCERNS REMAIN

The price of crude oil continued its downward trend as investors focused on the sweeping lockdowns announced in China. In the past few days, the number of Covid-19 cases in some Chinese cases has been in a strong upward trend. They have risen to the highest level in about two years. In response, the government has announced a major lockdown that is affecting over 50 million people. Therefore, analysts believe that this lockdown will lead to slower recovery of demand. Brent dropped below $100 for the first time in two weeks while West Texas Intermediate (WTI) moved below $95. Other commodities like gold and silver also plummeted.

The US dollar index retreated in the overnight session as investors refocused on the upcoming interest rate decision by the Federal Reserve. It comes at a time when the US is facing significant inflationary pressure. For example, the headline consumer inflation has jumped to a 40 year high of 7.9% while the producer price index rose to 10%. The unemployment rate has dropped to 3.8%. Therefore, the Fed’s challenge is on how quickly to raise interest rates without affecting the economic recovery. In a recent statement, Jerome Powell hinted that the bank would start with a 0.25% hike.

The economic calendar will have several important events. The US will publish the latest retail sales numbers which will provide more details about the financial health of the American consumer. Analysts expect the data to show that the country’s retail sales rose by 0.4% from the previous 4.8%. They also expect that the core retail sales fell from 3.3% to 0.9%. Meanwhile, the Energy Information Administration (EIA) will publish the latest inventories data. Statistics Canada will release February’s inflation data.

XBRUSD

The XBRUSD pair declined sharply as concerns about demand rose. It dropped to a low of 96.75, which was the lowest level since February 28th. It is also significantly lower than this month’s high of 131.35. On the four-hour chart, the pair moved below the 25-day and 50-day moving averages while the Commodity Channel Index (CCI) and MACD have kept falling. Therefore, the pair will likely have a relief rally on Wednesday.

EURUSD

The EURUSD pair moved sideways ahead of the Fed decision. It is trading at 1.0970, which is along the 23.6% Fibonacci retracement level on the three-hour chart. The pair has moved to the 25-day moving average while the Relative Strength Index (RSI) has moved to the neutral level of 50. The Average True Range (ATR) has also been in a downward trend. Therefore, the pair will likely remain in this range ahead of the FOMC decision.

XAGUSD

The XAGUSD pair has been in a bearish trend in the past few days. It is trading at 24.81, which is slightly above this week’s low of 24.50. On the four-hour chart, it has moved below the ascending trendline that is shown in yellow. It has also moved between the lower and middle lines of the Bollinger Bands while the DeMarker indicator has moved below the oversold level. Therefore, the pair will likely keep falling ahead of the Fed decision.