Daily Alert – Wednesday 7th July 2021: US drives down oil as OPEC+ fails

Mark NugentJuly 2021

Daily Alert – Wednesday 7th July 2021: US drives down oil as OPEC+ fails

Morning traders.

On Monday, the market saw OPEC’s failure to agree a production increase as a short-term bullish driver (prices up) with a possibility of a medium-term bearish move (prices down) if OPEC splintered and a price war ensued.

That was fine until the US returned to their desks on Tuesday and immediately ignored the bullish driver and went fully for the bearish driver, plunging WTI over the course of the day, ending around 3.3%. I had gone long on Monday night but managed to get my stop to breakeven on Tuesday before leaving for the golf course and before the price plunged.

I re-entered via a pending order which I placed last night, and which was triggered this morning. This is another reversal trade of what I feel is a market over-reaction. Is OPEC really going to start a price war? Maybe, but it is less than a 50 percent chance, so the risk is skewed to the upside. As I was making today’s video the price took another leg lower in front of my eyes, so I got out at breakeven, again. At the time of writing (1330 BST) I do not know what is causing this move. I am still bullish and will trade the reversal again.

Currencies are difficult to predict, as has been the case for some time. The JPY is reacting as we would expect from the strong risk sentiment seen this week, but the commodity currencies are not playing ball, so I have low conviction and have not traded.

I do think WTI offers the highest probability trade for this week.

Later today we have the FOMC meeting minutes which will be interesting and can move the markets.

I will be back on Friday.

Members can access today’s video in the VIP Club HERE