DailyFX.com -Markets/ China

DailyFX.com -

Talking Points:

• Oil lowered as US rig rose, Iran deal gained traction
• Copper in abeyance before China manufacturing gauge on Tuesday
• Gold subdued againstUS rate hike chances, macro events ahead

A series of political gatherings last week and this week made commodities more susceptible to macro events and drove up volatility. Last week’s strong rally met with price falls early this week.

Commodities opened in Asia with a downside bias as US dollar assumed modest gains after optimistic views on the US economy at Jackson Hole symposium restored rate hike chances in this year, on top of month-end USD demand.

Losses in commodities are likely prolonged by a decline in Shanghai stocks, as the Financial Times reported that Chinese officials would restrain from excessive stock buying. China announced extra stimulus policies last Friday after rate cuts on Tuesday, in part revealed consistent economic weakness.

Oil faded last week’s biggest two-day rally since 2009, although WTI oil stayed elevated at a safe distance above intraday support level at 43.45, followed by Friday’s low at 41.78. Brent mirrored these movements with intraday support in the area of 46.61-48.45. Both indicators fell over 1.5 percent by Asian noon time.

Oil fundamentals indicate a possible return of bearish sentiment as active U.S. rigs rose for six straight weeks to the highest since May, while Iran deal was only three votes short of being exempted from any veto by Congress.

Copper declined at a slower pace just as it rallied more moderately last week. Copper prices will likely be in abeyance coming up to China’s Manufacturing PMI data on Tuesday, from both official source and Markit/Caixin. This gauge of factory activity growth is expected to show a further decline, following a drop in Caixin’s flash figure on August 21.

Gold currently traded below 1136 in line with late Friday’s subdued levels, as the case for a rate hike this year found more support after Jackson Hole symposium. Given the overall uncertainty, gold will likely see more volatility throughout macro events and data releases this week. Gold prices continue to be supported around 20-day moving average, at 1120.7 today.

Looking ahead, China factory gauge on Tuesday, the European Central Bank’s Governing Council meeting on Wednesday, G20 meeting and U.S. Non-farm Payrolls on Friday will be milestones for investors in FX and commodities alike.