January Crude Oil futures rebounded after an early session setback. The intraday move was fueled by technical analysis factors and aggressive short-covering. The technical buying took place after the market made a successful test of a short-term retracement zone at $41.94 to $41.58. The short-covering rally was likely fueled by position squaring ahead of this week’s OPEC meeting.
Brent crude is on pace to close the month down about 8 percent. U.S. WTI crude oil could finish as low as 10 percent in November. The global supply glut and firmer U.S. Dollar were the primary drivers of this month’s selling pressure.
Traders don’t expect OPEC to cut production at its December 4 meeting, but it could introduce the idea of price support measures with other oil producers. There is speculation that OPEC and Russia could strike a deal to reduce production.
February Comex Gold futures inched lower on Monday, driven to nearly six month lows by the stronger U.S. Dollar. The dollar, which is pushing an eight-month high, weighed on gold prices throughout the month. This led to weaker demand because it made dollar-denominated gold more expensive for foreign traders. Additionally, higher U.S. interest rates will make gold a less attractive investment since it doesn’t pay interest or a dividend.
The prospect of further stimulus from the European Central Bank this week drove the EUR/USD to its lowest level since April 14. The ECB policy meeting, which takes place on Thursday, should have an impact on the currency markets. Although the central bank is widely expected to ease policy, today’s price action suggests that the decision may not be fully priced into the market.
The EUR/USD is in a position to finish about 4 percent lower for the month. Everyone seems to know that the ECB will make a major announcement, but investors aren’t sure whether the news will be bearish enough to trigger a break to parity over the near-term, or priced-in enough to fuel a stronger short-covering rally.