US Jobs Data and Dollar Drive SPY: Will It Impact Crude Oil?
Crude oil futures
WTI (West Texas Intermediate) crude oil (XLE) (XOP) (USO) futures contracts for August delivery rose 0.5% and were trading at $44.5 per barrel in electronic trade at 2:00 AM EST on July 10, 2017. US crude oil prices are near a one-week low.
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US Dollar Index
The US Dollar Index rose 0.22% to 95.8 on July 7, 2017. The US dollar (UUP) rose 0.3% last week. The US dollar rose due to a better-than-expected increase in US jobs data. A market survey estimates that US non-farm payrolls would increase by 178,000 in June 2017. The U.S. Bureau of Labor Statistics reported that US non-farm payrolls increased by 222,000 in June 2017. The US unemployment rate was at 4.4%—the lowest level since 2001.
The better-than-expected rise in US manufacturing data, or the purchasing managers’ index, also supported the US dollar last week.
The S&P 500 Index (SPY) (SPX-INDEX) rose 0.64% to 2,425 on July 7, 2017. SPY rose due to the strong dollar and US jobs data. The S&P 500 hit 2,453.5 on June 19, 2017—its highest level ever.
US dollar’s high and low
The US dollar hit 95.37 on June 29, 2017—its lowest level in eight months. The US Dollar Index hit a high of 103.8—its highest level in 14 years—on January 3, 2017. President Trump’s inability to deliver tax subsidies and fiscal stimulus pressured the US dollar.
Crude oil and the US dollar are inversely related. A strong dollar makes crude oil expensive for crude oil importers. The expectation of a strong dollar in the short term could pressure crude oil prices. However, bullish momentum in SPY could support energy demand and the energy sector.
In the next part, we’ll discuss the support and resistance level for US crude oil prices.