U.S. Stocks Hit New High on Stalling Oil Prices, What’s the Key Factor?

WikiFX News (25 Aug)- U.S. stocks hit a new high yesterday, thanks to the good news on vaccine and the loose policy sustained by the FED. Nevertheless, the imbalance between supply and demand took a toll on crude oil, another measurement of global economics, stagnating its upside trend.

Currently, the strong DXY benefits more from the weak European currencies, which has limited pressure on oil prices.

At present, oil prices have found its relative balance in the face of the OPEC+ production cut and the difficult and slow recovery in demand. Despite the optimism of markets about the mid-term outlook of crude oil, bulls are not so confident on its future gains. Technically speaking, oil prices have been trapped in “a period of ambiguity” since last week, and although such period wont be long, markets have completely given up forecasting the short-term oil prices

However, oil prices still owns an optimistic outlook in the mid term under the background that OPEC+ has agreed to extend the production cut, the U.S. presidential election is approaching and the FED will maintain a loose policy for a long time. Therefore, the room for a sharp reversal in oil prices is expected to be limited while investors may keep eye on the $41.30 level.

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Chart: Comparison between the DXY and crude oil indexes