OIL: Crude Heading For Another Monthly Fall; Fed, EIA, US-CH & OPEC Key Events

The BBDXY has had a range of 1202.41 - 1205.07 in the Asia-Pac session; it is currently trading around 1202, -0.25%. The USD topped out towards 1210 again on Friday and has drifted lower very easily, the follow through this morning being aided by US shutdown fears. I can’t see any big directional moves this week until the market sees the Payroll number. Next resistance is back towards the 1215-1225 area where I would expect sellers to remerge initially. The big question is at what level do the global asset managers return to selling for hedging purposes. First support back towards the 1200 area and then 1195. Quarter-end for Asset managers likely to see some USD selling to rebalance portfolios.

• EUR/USD -  Asian range 1.1702 - 1.1729, Asia is currently trading 1.1730. The pair has drifted back above 1.1700, I suspect sellers could reemerge above 1.1750 initially. The deeper correction looks to have been put on hold for now as the focus turns toward the payroll number. 
• GBP/USD - Asian range 1.3394 - 1.3434, Asia is currently dealing around 1.3435. The pair could not break through its support around the 1.3300 area, price has bounced back into the range. The market should be looking for bounces to fade, first sell zone back towards the 1.3500 area.
• USD/CNH - Asian range 7.1199 - 7.1432, the USD/CNY fix printed 7.1089, Asia is currently dealing around 7.1230. The pair stalled toward 7.1500 and collapsed lower again very easily. The area just below 7.1000 has proved to be well supported recently lets see if that continues.
• Cross asset : SPX +0.35%, Gold $3798, US 10-Year 4.158%, BBDXY 1202, Crude Oil $65.31
• Data/Events : Spain CPI/Retail Sales, EZ Consumer Confidence

Fig 1: BBDXY Spot 2H Chart

Source: MNI - Market News/Bloomberg Finance L.P

After rising 2% last week, gold prices are currently up 1.0% to $3797.7/oz so far in Monday’s APAC session. It is not too far off the new record high at $3799.40 reached today, holding below round number resistance at $3800, the last record was $3791.1 on 23 September. It is being supported by flight-to-quality flows as a US government shutdown looms from Wednesday as Democrats and Republicans can’t agree on a debt ceiling lift. In addition, the market has almost two Fed cuts by end 2025. The US dollar has also softened further (BBDXY -0.2%) and the 2-year yield is slightly lower.

• Silver has also continued to rally after Friday’s 2% jump driven by not just safe haven flows but also tightness in the physical market. The metal is used in solar panel production. Silver is up 2.1% to $47.04 so far in Monday’s trading, above resistance at $46.092. It reached a high of $47.181 but has struggled to hold breaks above $47.
• A US shutdown could delay data releases with the key payrolls data currently scheduled for Friday. President Trump is scheduled to meet with party leaders to find a solution to the fiscal impasse.
• Equities are generally stronger with the S&P e-mini up 0.3% and Hang Seng +1.4% but Nikkei down 1.4% due to month end. Oil prices are lower with WTI -0.6% to $65.31/bbl. Copper is up 0.8%.
• Later the Fed’s Waller, Musalem and Bostic speak as well as Cleveland’s Hammack with ECB’s Lane & BoE’s Ramsden. The ECB’s Cipollone, Schnabel and Machado also appear. In terms of data, there is US Dallas Fed September manufacturing, preliminary September Spanish CPI, September European Commission survey.

The NZD/USD had a range of 0.5771 - 0.5786 in the Asia-Pac session, going into the London open trading around 0.5785, +0.25%. US stocks found some support and the USD’s bout of strength stalled as the data on Friday came in as expected. The NZD found some demand back towards the 0.5750 area and is trying to bounce, getting an added nudge this morning as the risk of a US government shutdown increases. The NZD broke through its pivotal 0.5800 support last week which should keep the pair under pressure heading into payrolls. The first sell zone would be back towards the 0.5850/0.5900 area.

• Bloomberg - “RBNZ Says Pandemic Inflation Taught It Lessons for Future Shocks. The Reserve Bank’s Monetary Policy Committee has gained valuable insights into how economic activity, price setting by businesses and inflation expectations evolve during periods of high inflation and economic volatility, Conway said Monday in Wellington after releasing a review of monetary policy in recent years.”
• “Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott. “The next thing to get priced in is probably a government shutdown, which has historically been a bad thing for short-term economic growth and pulled US Treasury yields down,” LeBas said.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5785(NZD904m Sept 30), 0.5875(NZD372m Sept 30) - BBG
• CFTC Data of last week shows Asset Managers continuing to rebuild their short positions in the NZD, -18421(Last -11933). The Leveraged community don’t seem as convinced and reduced their own shorts, -2850(Last -5327).
• AUD/NZD range for the session has been 1.1328 - 1.1354, currently trading around 1.1350. The Cross has broken above the multiple highs around the 1.1200 area and is consolidating its extension above 1.1300, helped by the AU CPI print. Dips should now continue to be supported as the market turns its focus towards the 1.1400/1.1500 area.

Fig 1: NZD CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P