Market Analysis

WTI

Oil prices experienced a slight retreat on Monday, yet they largely maintained their recent gains amidst multiple factors influencing the market sentiment. Brent crude, the international benchmark, edged down by 0.2% to $86.83 a barrel, while U.S. West Texas Intermediate (WTI) crude stood at $83.06 a barrel, down by 0.1%.

The primary factors underpinning the oil market include expectations of tighter supply due to ongoing OPEC+ production cuts, recent attacks on Russian refineries, and positive Chinese manufacturing data. The recent attacks on Russian refineries have added pressure to global oil supply, contributing to the bullish sentiment in the market. Furthermore, upbeat Chinese manufacturing data signaled robust demand prospects, further supporting oil prices.

However, it's noteworthy that despite these positive indicators, oil prices have experienced only a marginal decline. This resilience suggests that market participants remain cautiously optimistic about the supply-demand dynamics, with the potential for further geopolitical tensions to disrupt supply chains.

XAUUSD

XAUUSD prices continued their upward trajectory, reaching record highs as the second quarter commenced. Bullion surged by as much as 1.2% to $2,256.44 an ounce, extending its rally driven by multiple factors, including the Federal Reserve's dovish stance and escalating geopolitical tensions.

The Federal Reserve's recent indications of moving closer to rate cuts have significantly bolstered the appeal of gold as a hedge against inflation and currency devaluation. Moreover, the Fed's preferred gauge of underlying inflation cooling in February, coupled with geopolitical uncertainties, has further fueled investor interest in gold.

The ongoing geopolitical tensions, exacerbated by various global conflicts and uncertainties, continue to enhance gold's safe-haven appeal. Investors are seeking refuge in gold amid concerns over the economic repercussions of geopolitical instability, contributing to its sustained rally.

Given the current market environment characterized by accommodative central bank policies and geopolitical uncertainties, gold is likely to maintain its bullish momentum in the near term. However, market participants should remain vigilant of any developments that could potentially alter the risk landscape and influence gold prices.

EURUSD

In the forex market, the EURUSD pair traded on a weaker note near 1.0787 amidst renewed demand for the US dollar (USD) during the early Asian session. The higher-for-longer stance from the Federal Reserve (Fed) provided support to the Greenback, weighing on the EURUSD pair. Meanwhile, the US Dollar Index (DXY) traded around 104.52, gaining 0.03% on the day.

The release of US Core PCE data, which indicated a 0.3% month-on-month increase and a 2.8% year-on-year rise, matched market expectations. Additionally, ECB's Stournaras mentioned the possibility of four interest rate cuts in 2024, which could potentially weaken the euro against the US dollar.

The renewed strength in the US dollar can be attributed to the Federal Reserve's hawkish stance compared to other central banks, including the European Central Bank (ECB). The prospect of tighter monetary policy in the United States has bolstered the attractiveness of the US dollar relative to its counterparts.

In light of these developments, traders may consider monitoring the evolving dynamics between central bank policies and economic indicators to gauge potential trading opportunities in the EURUSD pair. Additionally, geopolitical developments and risk sentiment could also influence the direction of the currency pair in the near term.

Entry Suggestions

XAUUSD: Given the record highs and bullish momentum in gold prices, a potential entry strategy could involve buying on pullbacks or consolidations near key support levels, such as $2,200 an ounce. Traders may consider placing stop-loss orders below immediate support levels to manage risk effectively.

EURUSD: With the US dollar exhibiting strength against the euro, traders may explore short positions on the EURUSD pair, targeting downside levels around 1.0750. It's advisable to closely monitor key economic data releases, central bank communications, and geopolitical developments for potential entry points.

WTI: Despite the slight retreat in oil prices, the overall bullish sentiment remains intact. Traders could consider long positions on WTI crude oil, particularly on pullbacks towards key support levels around $80 a barrel. Implementing trailing stop-loss orders can help protect profits in case of adverse price movements.

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Paraphrasing text from FXStreet, Yahoo Finance and Reuters all rights reserved by the original author.