Technical Factors Fuel Turnaround in Crude Oil

Crude oil futures rebounded on Monday after early session weakness to close higher. There was no major news event to fuel the turnaround so most traders attributed the reversal to technical factors. Gains could be limited because of worries over increased U.S. drilling activity and uncertainty over Libyan and Nigerian production.

In other news, several key OPEC ministers are scheduled to meet non-OPEC Russia on July 24 in St. Petersburg, Russia, to discuss the current situation in the global oil markets.

Nigeria and Libya were invited to the meeting and their production could be capped earlier than November, when OPEC is scheduled to hold formal talks, according to Bloomberg. Officials from Nigeria said they were unable to attend the meeting because of a previous commitment. Libya said on Monday it was ready to talk about a production cap, but added that its political, economic and humanitarian situation should be taken into account in talks on caps.

Gold

August Comex Gold futures reversed earlier weakness to close higher on Monday. Buyers came in as the market approached its March 10 bottom at $1201.40. There were no changes in the fundamentals so the buying was likely fueled profit-taking, short-covering and some aggressive counter-trend buying.

Forex

The U.S. Dollar rose to a two-month high against the Japanese on Monday in reaction to the news from last week that the Bank of Japan was prepared to buy an unlimited amount of bonds to keep the pressure on yields.

On Monday, BOJ Governor Haruhiko Kuroda reiterated the central bank’s pledge to keep Japanese government bond yields anchored near zero.

The Canadian Dollar retreated against the U.S. Dollar on Monday as investors awaited a Bank of Canada interest rate decision on Wednesday. Analysts are divided on whether the central bank will raise rates but money market activity indicates the markets are almost fully priced for an increase.

U.S. Equities

U.S. stock index futures closed mixed on Monday with a rally in tech stocks contributing the most to the gains. Volume was light as some of the major players returned from an extended Fourth of July holiday. Traders attributed the lackluster trade to uncertainty ahead of the two-day testimony before Congress by Fed Chair Janet Yellen on Wednesday and Thursday and the start of earnings season later this week.