Production cuts help Crude recover lost ground
At the OPEC+ meeting held this Saturday, it was agreed to extend the production cut, which was currently maintained by around 9.7 million barrels per day for another month.
But the announcement that the output cut would be prolonged for only one more month with no intention of an extension has led the price of crude oil to stop its upward momentum and fall slightly in the day.
On the other hand, the risk of non-compliance with this agreement by some member countries has contributed to the fall. Saudi Arabia has publicly warned that there can be no agreement breaches, clearly showing its doubts about it.
It is also feared that this latest increase in crude oil prices may encourage fracking producers to return to the market by adding more supply than currently exists.
Global demand is recovering with economic reopening but is still insufficient to meet supply capacity and therefore, will not have enough strength to pull the price up. It all depends on the supply at this time and, in the short term, will hardly be reduced from current levels.
OIL has reached levels very close to its technical target around $41 and is currently correcting downward with an objective at $37, the 100-day SMA area.
The FX market
In the foreign exchange market, activity has remained remarkably steady with a slight tendency for the Dollar to weaken in a tranquil risk-on environment after Friday's surprising employment figures.
But in some specialized media, it has been published that the figure may have some irregularities due to certain difficulties in the method of counting the unemployed.
This may have left out of the statistics more than 3 million jobless, so it remains to be confirmed that the recovery shown in the unemployment figures is entirely accurate.
Next Wednesday's meeting of the Reserve will be of great importance in this regard. The Federal Reserve has been reducing the amount of asset purchases in recent days, so the amount of liquidity provided to the market has been declining.
This has led to a rise in bond yields. If the Federal Reserve is less inclined to maintain or increase its asset purchase policy because it believes the economy is recovering, this will lead to higher rises in bond yields, which would curb the weakness of the Dollar.
USD/JPY would be the most benefited pair in this scenario, possibly surpassing the area of 110.
On the other hand, it would not be positive for the stock markets to be exposed to corrections from the current levels. In the case of the TECH100 these corrective movements could bring it down to the 9500 area.
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