The sentiment has been negative since last Friday, following the attack on top Iranian military leader, which has turned risk assets bearish and safe havens bullish. The rhetoric has been strong in the following days, keeping the sentiment negative, but today the sentiment has improved somewhat as threatening comments have declined. We did hear Iran’s Supreme National Security Council who said to be assessing 13 retaliation ‘scenarios’ against the US and warned that even the weakest one will cause a ‘historic nightmare’. But, markets were little moved on that. 

We also some decent economic numbers from the Eurozone today, after the slight improvement in services PMI yesterday. Headline CPI (consumer price index) inflation increased to 1.3% in December, from 1.0% in November, while core inflation remained unchanged at 1.3%. Retail sales posted some nice gains though, which were elevated due to the Black Friday as well, but the Black Friday is not a big thing in Europe. Although, risk aversion is coming back right now.

The European Session

• Eurozone Retail Sales – Retail sales turned negative in October, posting a 0.6% decline, as the report released last month showed. But, that was revised higher today to -0.3%. For November, retail sales were expected to increase by 0.6%, but beat expectations, increasing by 1.0%.

• Eurozone CPI Inflation – The inflation report for December was released this morning from the Eurozone. Core Inflation remained unchanged at 1.3% as expected, after having increased from 0.9% back in summer. Core inflation stood at 1.0% in November, but it was expected to increase to 1.3% last month and it came as expected.

• Italian CPI Inflation – Inflation turned negative in September, declining by 0.5%. In the next two months, inflation fell flat at 0.0%, but the December number was revised lower to -0.2%. Today’s report was expected to show a 0.2% increase for December and it came as expected at 0.2% for last month.

The US Session

• US Factory Orders – US factory orders slowed down in October and were revised lower today, while in November, factory orders came in negative. Below are the details:

  • US factory orders for November 2019

  • Prior month 0.3%. Revised to +0.2%
  • Factory orders -0.7% versus -0.8% estimate
  • Factory Orders ex transportation +0.3%. Prior month revised to 0.3% from 0.2% originally reported
  • Durable Goods orders final -2.1% versus -2.0% estimate.  The preliminary estimate was -2.0%
  • Durable goods orders ex transportation final -0.1% versus 0.0% last preliminary
  • Capital goods orders nondefense ex air final +0.2% versus +0.1% preliminary
  • Capital goods shipments nondefense ex air final -0.3% versus -0.3% preliminary
• US ISM Non-Manufacturing PMI –
  • ISM non-manufacturing index 55.0 vs 54.5 expected
  • Prior was 53.9

  • Employment 55.2 versus 55.5 last month
  • New orders 54.9 versus 57.1 last month
  • Prices paid 58.5 vs 58.5 prior
  • Supplier deliveries 52.5 versus 51.5 last month
  • Order backlog 47.5 versus 48.5 last month
  • Export orders 51.0 versus 52.0 last month
  • Imports 48.0 versus 45.0 last month
  • Inventories 51.0 versus 50.5 last month

Trades in Sight

Bullish WTI Crude Oil

• The trend has turned bearish
• The retrace higher is complete
• The sentiment remains negative

The 100 SMA seems to be providing support on the H1 chart

Crude Oil has turned quite bullish, especially in December. OPEC+ decided to place additional production quotas at the beginning of the month and WTI crude broke above the big round level at $60.The climb continued, but after the attack on Iran’s Soleimani the tensions increased in the Middle East and fears of a production disruption sent crude Oil prices surging again.

Although, in the last two days we have seen a pullback lower. Buyers failed to reach $65 on Monday and it seems like they are staying on the sidelines, until the pullback lower is complete. The pullback seems complete now, with the price finding support at the 50 SMA (yellow).

The stochastic indicator is oversold on this time-frame, although the pullback might get a bit deeper and reach the 100 SMA (green). The initial panic after the Killing of Soleimani which sent Crude Oil surging is wearing off, hence the pullback lower. Although, that issue is far from over so, I expect Oil to turn bullish again.

In Conclusion

The sentiment has improved somewhat today with the USD finding some solid ground after the US ISM non-manufacturing PMI report. Although, I don’t think this will last long. The non-manufacturing headline came in better than expected, but the details were weaker.