Crude oil prices decline as China worries linger
Crude oil prices continued their downtrend as investors focused on the sweeping lockdowns announced in China. In the past few days, the number of Covid-19 cases has been on a strong upward trend in some Chinese cases. They’re up to their highest level in about two years. In response, the government has announced a full-scale lockdown affecting over 50 million people. Therefore, analysts believe this lockdown will lead to a slower recovery in demand. Brent fell below $100 for the first time in two weeks, while West Texas Intermediate (WTI) fell below $95. Other commodities such as gold and silver also collapsed.
The US dollar index fell in the overnight session as investors refocused on the upcoming Federal Reserve interest rate decision. It comes at a time when the US is facing significant inflationary pressures. For example, consumer price inflation has risen to a 40-year high of 7.9%, while the producer price index has risen to 10%. The unemployment rate fell to 3.8%. Therefore, the Fed’s challenge is how quickly interest rates can be raised without hurting the economic recovery. In a recent statement, Jerome Powell indicated that the bank would start with a 0.25% hike.
The economic calendar will feature several important events. The US is due to release the latest retail sales numbers, which will provide more details on the financial health of the American consumer. Analysts expect data to show the country’s retail sales rose 0.4% from 4.8% previously. They also expect core retail sales to have declined to 0.9% from 3.3%. In the meantime, the Energy Information Administration (EIA) will publish the latest inventory data. Statistics Canada will release inflation data for February.
The XBRUSD pair declined sharply as concerns over demand grew. It fell to a low of 96.75, which was the lowest level since February 28. It is also well below 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 continued to fall. Therefore, the pair is likely to see a recovery rally on Wednesday.
The EURUSD pair moved sideways ahead of the Fed’s 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 50 level. The Average True Range (ATR) is also in a downtrend. Hence, the pair is likely to stay within this range ahead of the FOMC decision.
The XAGUSD pair has been in a bearish trend for the past few days. It is trading at 24.81, slightly above the weekly low of 24.50. On the four-hour chart, it has moved below the ascending trend line, which is shown in yellow. It has also moved between the lower and middle lines of the Bollinger Bands while the DeMarker indicator moved below the oversold level. Therefore, the pair is likely to continue falling ahead of the Fed’s decision.