Two trades to watch: EUR/USD, Oil

EURUSD drops in risk-off trade & despite Macron’s win. Oil falls to a two week low on demand fears.


EUR/USD drops in risk-off trade & despite Macron’s win

EUR/USD has plunged lower, heading towards the European open.

Despite a win by Macron in the French Presidential elections (58% vs. Le Pen’s 42%), which is a relief for the euro, the relief rally was short-lived.

The euro is dropping sharply in risk off-trade as the European Commission works on a sixth sanctions package, which could involve some sort of oil embargo.

Christine Lagarde also poured cold water over the prospects of a July rate hike in a TV interview over the weekend.

Looking ahead, German IFO business sentiment data is expected to show a deterioration in business morale to 89.1 in April, down from 90.8 in March.

Meanwhile, the USD is rising on hawkish Fed bets safe have flows.

Learn more about the euro

Where next for EUR/USD?

EURUSD trades below its multi-month falling trendline and below its 50 & 100 sma in a bearish trend. The RSI is below 40 and remains out of oversold territory, keeping sellers hopeful of further downside.

Bears have taken out the 2022 low of 1.0765, bringing 107 round number and 1.0630, the March 2020 low, into target.

Buyers will look for a move over 1.08, the round number, and March 2022 low, in order to claw higher towards 1.0940, last week’s high.


Oil falls to a two week low on demand fears

Oil prices fell 4.5% and are declining a further 3.8% at the start of the week on demand outlook fears.

Ongoing COVID lockdowns in China are raising demand concerns. China’s oil demand has been falling the most since the Wuhan lockdown at the start of the pandemic, with fuel consumption expected to fall 20% YoY.

Shanghai shows no signs of letting up its strict zero-COVID policy, instead vowing to step up the enforcement of COVID restrictions.

Also hurting the demand outlook is the prospect of higher interest rates slowing economic growth and bringing demand destruction.

However, reports that the EU is looking at ways to sanction Russian oil is helping to limit losses. Should any news of EU sanctions on oil come through, we could expect to price of oil to rebound higher.

Learn more about trading oil

Where next for WTI oil?

US crude oil ran into resistance at 109.10, the falling trendline, and rebounded lower. The price moving below the 50 SMA and the $100 psychological level, combined with the RSI heading below 50, keeps sellers optimistic about further losses.

Sellers will be looking for a move below the rising trendline at 96.30 to bring 94.80, the February 14 high, into play before exposing the 100 sma at 91.00, with a move below here creating a lower low.

Buyers see $100 as the first line in the sand for any recovery ahead of the 50 sna at 102.00 and 104.20, the April 21 high. It would take a move over 109.10 to create a higher high and the bulls to gain traction.


oil chart

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.