Commodity Market: US Crude Oil surges almost 1% on Tuesday as US Dollar plummets to 28-month lows

Futures on US West Texas Intermediate Crude Oil rebounded on Tuesday, as market players were buying riskier assets and selling the US Dollar, a traditional safe haven, following a shift in policy framework introduced by the Federal Reserve Bank last week.

The central bank’s policy shift to target average inflation and higher employment suggested that the bank could keep borrowing costs lower for longer, which sent the US Dollar down to lows not seen since April 30th 2018 against a basket of six major currencies. The US Dollar Index (DXY) was retreating 0.37% to 91.81 on Tuesday.

“It (the policy shift) really cements the fact that you’re looking at negative real rates for the U.S. which will not be great for the U.S. dollar. That’s good for commodities,” Louis Crous, chief investment officer at Australia’s BetaShares, said.

A weaker US Dollar makes Oil and other dollar-priced commodities more appealing to international investors.

Additional support for oil markets came after upbeat manufacturing data out of China. The Caixin Manufacturing Purchasing Managers’ Index pointed to the sharpest expansion in Chinese factory activity in almost 10 years in August, as new export orders rose for the first time in 2020.

“Expectations of higher consumption, powered by a China recovery, lifted sentiment and saw both Brent crude and WTI track higher in Asia,” Jeffrey Halley, a senior market analyst at OANDA, said.

“Both contracts are now close to monthly highs and are poised to shake off the range-trading malaise of the past two months.”

As of 9:15 GMT on Tuesday WTI Crude Oil Futures were gaining 0.89% to trade at $42.99 per barrel, while moving within a daily range of $42.77-$43.23. WTI Crude Futures rose 5.81% in August, while marking their fourth straight month of gains.

Brent Oil Futures were edging up 0.35% on the day to trade at $45.72 per barrel, while moving within a daily range of $45.50-$45.90. Brent Oil Futures rose 4.45% in August, while marking their fifth straight month of gains.

Daily Pivot Levels (traditional method of calculation) – WTI Crude Oil Futures

Central Pivot – $42.91
R1 – $43.27
R2 – $43.92
R3 – $44.28
R4 – $44.63

S1 – $42.26
S2 – $41.90
S3 – $41.25
S4 – $40.59

Daily Pivot Levels (traditional method of calculation) – Brent Oil Futures

Central Pivot – $45.77
R1 – $46.29
R2 – $47.03
R3 – $47.55
R4 – $48.08

S1 – $45.03
S2 – $44.51
S3 – $43.77
S4 – $43.04