U.S. Holiday Leads to Low Volume Day; Crude Oil Ends Winning Streak

It was a quiet day in the markets on Tuesday. With the U.S. banks on holiday in celebration of Independence Day, most of the major market players were absent. Although the trading volume was well below average across the board, the trade was orderly with no unusual activity.

Crude Oil

U.S. West Texas Intermediate and international benchmark Brent crude oil finished lower for the first time in eight sessions. The markets were under pressure early in the session due to pressure from Asia and didn’t have the buying volume in the U.S. to recover from those losses.

Despite the setback, several traders felt the market could recover from Tuesday’s losses once normal trading conditions resume on Wednesday. They feel that sentiment has changed to positive towards crude oil after U.S. data showed a dip in American oil output and a slight fall in drilling for new production.

BMI Research said, “We see a recovery for oil prices in H2 2017 from current levels, with OPEC production cuts, a slowdown in global supply growth and seasonally firming demand driving up prices.” It also added that “large-volume supply additions will keep price growth flat year-on-year in 2018.”

ANZ bank thinks that some of the pressure on OPEC to rein in oversupply will be lifted by the dips in U.S. production and drilling. They called this action “a small but significant shift in the dynamics in the oil market.”

Forex

In Australia, the Reserve Bank of Australia left its benchmark interest rate unchanged and maintained its neutral policy. The news drove the Australian Dollar lower against most major currencies. Investors went into the monetary policy meeting hoping the RBA would join other major central banks in calling for tighter monetary policy. When the RBA did not meet these expectations, speculators aggressively sold their long positions.

The news from Australia helped boost the Japanese Yen against some major currencies including the U.S. Dollar. Last week, the Yen was pressured when the European Central Bank, the Bank of England and the Bank of Canada hinted at higher interest rates. The RBA decision helped provide a little relief for the technically oversold currency.

The Japanese Yen was also supported by flight to safety buying after a missile launch by North Korea.

Gold

Gold prices inched up on Tuesday due to extremely low volume, but some buyers came in to support the market as they waited for a response from the U.S. to the activity in North Korea. The Pentagon said on Tuesday it was prepared to defend the United States and its allies against the growing threat from North Korea.