Weak Data from Japan and China Pressures Crude Oil

April crude oil futures finished sharply lower on Monday. The catalyst behind the sell-off was a surprise drop in China’s exports and weaker-than-expected growth in Japan. Today’s downside momentum suggests the market may be headed toward a major retracement zone at $100.34 to $99.19.

On Friday, crude oil rallied after the U.S. government reported better than expected jobs data for February. Today’s reaction to the data from China and Japan suggests further downside action is likely since the reported results were not expected and traders may need a few days to reach a new value zone.

April gold finished higher on Monday after stubborn longs refused to yield to the aggressive short-sellers trying to drive the market through the last swing bottom at $1319.30. A trade through this level will turn the main trend to down on the daily chart.

On Friday, gold sold off after the release of the friendly U.S. jobs report. With the U.S. Dollar firming on rising interest rates, investors pared gold positions. The threat of escalating tension between Ukraine and Russia and the possibility of a sell-off in the equity markets led to increased hedge buying. This trend should continue this week especially if there is military activity between the two countries.

There were no major U.S. economic reports today, but the GBP/USD continued to react to the U.S. Non-Farm Payrolls report from Friday which indicated a strengthening U.S. economy. Fundamentally, tensions in the Ukraine and the weak economic data from China and Japan also weighed on prices. Technically, Friday’s potentially bearish closing price reversal top and today’s change in trend to down on the daily charts indicate a shift in sentiment to the downside. The daily chart pegs 1.6537 as the next downside target.

Despite growing concerns about Ukraine, the EUR/USD remained steady on Monday. The lack of follow-through to the upside following Friday’s surge may be an indication that the selling is greater than the buying at current price levels. The inability to sustain a move over the former top at 1.3893 may also be an indication that short-covering rather than new buying may be the catalyst behind the current strength.

Although European Central Bank President said last Thursday that he was confident in the economy, the rapid rise in the EUR/USD may raise some concerns about a drop in exports. This may lead the ECB to try to talk down the rise in the currency.