Crude oil prices retraced after a two-day rally. The expanding wildfire in Canada and escalating fighting in Libya initially got market nerves jangling, but this worry was eased last night.

Investors may have realised that this could be a temporary disruption in oil production, and markets have to adjust their expectations over supply and demand. WTI crude oil is trading at $44.20 this morning. A stronger US dollar continued to weigh on commodities. The gold price fell to $1,276 after testing a 15-month high of $1,300 only three days ago.

Equities
The US market traded flat last night, as investors exercised caution ahead of the US non-farm payrolls number to be announced tonight. The Singapore market extended to slide for a fifth day and it opened lower this morning. The Straits Times Index broke down a key support level of 2,767 yesterday. The next major support zone is near the 2,520-2600 area.  

The China Caixin service PMI – a gauge on small- and medium-sized enterprises in the services sector - dropped to 51.8 in April from 52.2 in March, though it still remained in expansionary territory. The Caixin manufacturing PMI released early this week also fell to 49.4, comparing to market expectations of 49.9. This shows that the economy is still facing the headwind of slowdown, and the government need to maintain support for the economy via monetary and fiscal policies. China is undergoing a structural reform, targeting a shift from manufacturing- and investment-driven growth toward a more service-oriented economy, aiming also to foster domestic consumption.

FX
The Dollar Index rebounded for a third day to 93.75, as the market waits for clues on a possible June rate hike from tonight’s non-farm payroll numbers. The market forecasts 202k new jobs in April. If the number comes out much higher than this expectation, it might raise expectations of a June hike, and will potentially lead to a stronger dollar.

USD/JPY continues to consolidate at around 107.30. Immediate support and resistance levels for USD/JPY are at 105.20 and 108.30 respectively. EUR/USD slid to 1.1403 from an eight-month high of 1.1590 three days ago. GBP/USD also slid further to 1.4480. AUD/USD headed lower, dragged by softening metal prices.

Crude Oil West Texas Jun 2016
 
Key technical levels to watch:

  • Immediate support levels: 42.80
  • Immediate resistance level: 46.00
  • MACD converged and dead cross formed


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