Opening Bell: Oil Breaks $70; USD Advances; U.S. Futures Point Higher

Futures on the S&P 500, NASDAQ 100 and Dow are pointing to a positive US open later on Monday, following a subdued Asian session and indecisive early trade in Europe. Shares listed on the STOXX Europe 600 meandered aimlessly and volume was lighter than usual, the result of a UK bank holiday.

Earlier this morning Asian indices were taking stock of the underwhelming picture from Friday's US nonfarm payrolls release—though unemployment hit an18-year low. Wage growth remaining muted. Nevertheless, equities in Japan managed to rebound from an earlier loss, sparked by a stronger yen. Shares listed on the Nikkei 225 bounced from a 0.5 percent retreat to close up 0.3 percent into positive territory and the broader TOPIX turned a 0.35 percent loss into a 0.1 percent gain.

The yen strengthened after minutes from the BoJ monetary policy meeting revealed that Japanese policymakers expect the local economy will continue its upward trend. Technically, the USD/JPY pair has formed an extremely bullish hammer (very long lower shadow, no upper shadow), rallying for 6 straight hours. The advance reached the neckline of an hourly H&S bottom in the 7th hour and is pressured below it, producing a bearish shooting star (extremely long upper shadow, no lower shadow).

While a country's strong economic growth generally increases demand for its domestic currency, when it comes to Japan, a healthy economic trend generally prompts a rotation out of the safe-haven yen and into risk assets. Thus, Japanese stocks were hurt by a stronger yen. The Nikkei fell 0.1% as the market reopened after a four-day weekend.

Despite the ongoing trade stalemate between China and the US, Chinese equities led gains on Monday, surging 1 percent. Prices benefited from the release, on Friday, of draft rules for depository receipts, which paves the way for Chinese tech firms listed overseas to trade on mainland exchanges. The current scarcity of IPOs is also encouraging investors to keep their cash invested, therefore propping up prices.

Small cap stocks listed on the startup-heavy ChiNext outperformed, leaping 1.7 percent, thanks in part to these more localized equities being less dependent on foreign sales for growth. Small cap US companies listed on the Russell 2000 are also currently outperforming for the same reason, second only to shares listed on the NASDAQ Composite.

China’s advance drove shares on Hong Kong’s Hang Seng 0.5 percent higher, boosting the index's performance after its having underperformed for six out of the past seven negative weeks. The Hang Seng has recently taken a hit from heightened worries that the Hong Kong Monetary Authority will hike rates following the Hong Kong dollar's plunge to the bottom of its targeted trading band on April 12, when the HKD hit that key level for the first time since the range was set by the monetary watchdog in 2005.

Overall, commodities stocks are driving a reversal of Friday’s financials-led selloff, after WTI crude leaped 1 percent this morning, breaching the key $70 level for the first time since November 2014, as traders upped their bets over US President Donald Trump’s upcoming decision on whether or not to sign the waiver for sanctions against Iran.

Saturday's upcoming deadline is especially critical after Trump mentioned, on January 12, he wouldn't confirm the waiver 'next time' unless the US Congress and European politicians came up with a better deal. Complicating the picture: Saudi Arabian pressure for a harder stance against Iran and Israeli Prime Minister Benjamin Netanyahu's recent accusations that Iran's nuclear agenda has been percolating despite the Obama deal.

The event is so charged that markets are all but guaranteed to react strongly no matter what the outcome. Equities are expected to react favorably to an extension of the deal and to sell off if Trump decides not to waive sanctions.

Oil is likely to enter a correction if the US president confirms the waiver and to spike further if he doesn't. Gold, the yen and Treasury yields are forecast to fall in the former case and surge in the latter. As for the dollar, it will probably be considered a safe haven during a global crisis, as investors put their faith in the US's political stability and military clout.

Technically, WTI's price extended the penetration of the bullish Falling Flag breakout that itself was the breakout breach of a bullish Ascending triangle since late January.

At the same time the yen was been retreating (above), gold and Treasurys were falling, supporting risk-on sentiment. Technically, the price of gold has failed to meaningfully advance above the previous peak and has instead been falling back to retest the uptrend line since May 1. A close below it may signal a double top.

Should Middle East tensions escalate, the price of gold is expected to jump, along with prices of other safe haven assets, while equities will contract.

The dollar is advancing for a second day, in attempt to retest the resistance of Friday’s shooting star. A close above would suggest a second leg in the rally following the breakout of an Ascending Triangle bottom, while a close below 92.20 would suggest a return move to retest the bottom at 91.00.

Bitcoin continued to pull back from its latest attempt to hit $10,000, for the first time in two months. Technically, it has failed, so far, to complete a double-bottom, which requires a penetration of the neckline at $11,667.