EU, UK, and US Eagerly Awaiting the Release of the PMI

Both the Eurozone and the UK are waiting for the release of the latest respective Purchase Manager Index (PMI). Both will be released today and are likely to be one of the main price drivers. The US is also scheduled to release their PMI this afternoon. The price movement this morning remains similar to yesterday; the Euro continues to decline and has formed its 4th consecutive daily bearish candlestick. The Pound also continues to decline even as UK bond yields significantly increase.

The US Dollar Index increased to new yearly highs and did not necessarily struggle to break out of the previous high. The index is currently priced at 109.15 and has increased by 0.19% this morning. However, traders should be cautious as the economic releases throughout the day may cause some volatility.

The US stock market declined for a third consecutive day, measuring a drop of over 5%. The price of US indices has also declined in this morning’s future markets, with NASDAQ recording the largest decline measured at 2.66%.

Crude oil prices continue to see high levels of volatility in both directions as traders try to get to grips with the price action. Traders are hopeful the price will be able to form a longer-term trend with fewer corrections. The Organization of the Petroleum Exporting Countries (OPEC) has also offered some comments on the level of volatility, as we will see below.

EUR/USD

The EUR/USD exchange rate continues to be in the headlines as it was yesterday. The price continues to move within a downtrend with each wave easily breaking to a lower low, and any bullish movement quickly losing momentum. Impulse waves measure 200 Points in Price (PIPs) on average and retracements at 50 PIPs. So, we can see here that the momentum remains in favor of the US Dollar.

The price has crossed onto a new low and there is no indication yet from volatility indicators that the trend is losing steam. However, traders remain cautious as certain oscillators point to oversold. This means that, at some point, the price of the currency pair may become oversold in the short term. For now, the price still remains below moving averages, and crossovers are in favor of the USD so far.

EUR/USD 4-Hour price chart on August 23rd.

The price continues to be influenced by the European energy crisis which is putting significant pressure on the currency as the colder months will soon arrive. As mentioned yesterday, the Nord Stream gas pipeline will again close for repair works as tensions continue to rise between the EU and Russia. The growing gas shortage in the Eurozone is putting the economy at a greater risk of seeing a recession. Bundesbank President, Mr Nagel, has already advised in an interview that the German economy is likely to undergo a recession in the winter, but the severity of the economic contraction is yet to be known.

Crude Oil

The price of crude oil has not only seen high levels of volatility but also a lack of direction over the past 24 hours. The asset has seen impulse waves in both directions and two price corrections over the last 24 hours. This has made it more difficult for traders attempting to trade the trend.

Crude Oil 1-Hour price chart on August 23rd.

The price of the asset is being driven by two opposing factors which has pretty much been the theme throughout the past month. On the one hand, the energy supply crisis continues to bring the Euro down. And on the other hand, the Dollar continues to remain strong with the Fed’s monetary policy continuing to put further pressure on consumers and businesses. Both are negative points for the asset as it is correlated with the Dollar and with economic activity.

However, the comments given by OPEC over the past few hours indicate that supply may be cut in order to stabilize the price and, of course, protect crude oil from further declines. For example, Saudi Arabia’s Energy Minister has advised that the volatility levels are a danger to the industry and the country may opt to lower output at some point if the price continues to decline. OPEC+ has also previously predicted that the level of demand may decline which may also prompt the group to control output.

Investors will continue monitoring comments from OPEC members, but will also be focusing on tomorrow’s oil inventories and the US Gross Domestic Product figure scheduled for Thursday.

Key Takeaways

• The Eurozone, the UK and the US are all waiting for the release of their respective PMI figures.
• The US Dollar Index increased to new yearly highs.
• The US stock market declined by more than 5%.
• EUR/USD continues to move within a downtrend.
• The Bundesbank President advised that Germany is likely to undergo a recession in the winter.
• High levels of volatility and a lack of direction for crude oil.
• OPEC members advise that supply cuts may be made in order to stabilize the price.