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The short covering oil rally is key for market sentiment

Last updated: May 3rd, 2017 at 09:58 pm

We ended last week with some significant improvement in market sentiment. Whilst not to be unexpected dovish comments from the European Central Bank’s President Mario Draghi certainly had a contributory factor, it was undoubtedly the jump in the oil price which helped to drive markets into recovery mode. The significant weakness and flight into safe haven trades has been a function of the moves on the oil price early in 2016. The fear sweeping through markets finally found some respite but the big question on the lips of traders around the world I of how sustainable this move is. Already on Monday morning the slipping back of oil has impacted negatively on risk and this has been felt across asset prices again. The continuation of a short covering oil rally is key for the direction of market sentiment this week. Add in the prospect of three major central banks reporting monetary policy, including the US Federal Reserve and the volatility is likely to remain elevated in the coming days. Additionally, what are the other key factors for traders to watch?

How have the forex markets reacted to the shifting sands of market sentiment in recent days, and are there trends developing that we can look at? There is also a look at the technical analysis of two key markets, with the ever important Euro/Dollar and the safe haven risk barometer of Dollar/Yen. How are the global equity markets moving and what will be the drivers in the coming days? The assessment of the longer term technical analysis of the DAX throws up some really interesting technical developments which could drive some key entry and exit points for medium to longer term positions. There is also a closer look at the chart of the FTSE 100 Index. Can we be trusting the rally on gold, and what can we make of the short covering bounce on oil? What are the Treasury yields saying? We finish with a technical analysis of gold and Brent Crude oil.

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.