The price of crude oil declined in overnight trading even after OPEC and its allies agreed to a historic supply cut. The members agreed to cut production by 10 million barrels per day. This is the biggest oil supply cut deal in the world that will see about 10% of the oil exported per day slashed. Oil price declined possibly for three reasons. First, the supply cut was already priced-in by the market. Second, the agreed amount was lower than the 20 million that was rumored yesterday. Third, Mexico rejected the allocated 400k supply cut. Instead, the country said that it was willing to cut a maximum of 100k barrels per day. The 10 million supply cut will remain until June and then fall to 8 million for the rest of the year.
The British pound rose after Boris Johnson left the intensive care unit as his health improved. The prime minister has been suffering from coronavirus for the past three weeks. He will continue receiving close medical attention at Number 10. Still, the UK is in a challenging situation. Most businesses are expected to file for bankruptcy and millions of people are likely to lose their jobs. This has been made worse by the fact that the country does not yet have a deal with the European Union on Brexit.
The US dollar weakened in the American and Asian sessions after the Federal Reserve announced its new response to save the economy. In a speech at the Brookings Institute, the Federal Reserve chair said that the bank would provide more than $2.3 trillion to businesses. This is in addition to other tools the bank has deployed including an open-ended quantitative easing and bringing interest rates to zero. All this has seen the bank increase its balance sheet to more than $5.8 trillion.
The EUR/USD pair rose slightly as the market reacted to the News from the Federal Reserve. The pair is trading at 1.0935, which is the highest level since April 2. On the hourly chart, the price is at the highest it has been since Thursday last week. The pair is slightly above the 14-day and 28-day exponential moving averages. It has also moved above the 38.2% Fibonacci Retracement level. Therefore, there is a likelihood that it will attempt to test the 50% level at 1.0962.
The XBR/USD pair declined to an intraday low of 32.45 from a high of 37.01. The price is below the 14-day and 28-day exponential moving average on the hourly chart. The RSI has also declined from yesterday’s high of 70 to the current level of 35. The momentum indicator has also been falling. There is a likelihood that the pair will decline and test the support of 30.00.
The XAU/USD pair rose to a high of 1690 after the Fed announced new measures. The pair is above the 14-day and 28-day exponential moving average while the RSI has moved to above 70. The momentum indicator has edged slightly higher too. The pair could continue rising as the market continue to price-in more action from the Fed.