OIL: Crude Holding Gains Ahead Of Fed & EIA Data
Crude has held onto most of this week’s gains trending only slightly lower during today’s APAC session. WTI is down 0.1% to $64.45/bbl after a low of $64.37 but it reached $64.67 early in the session. Brent is 0.1% lower at $68.38/bbl, close to the intraday low. The USD index is little changed ahead of the Fed decision later on Wednesday.
- A dovish Fed is likely to be good for oil prices as rate cuts should support energy demand, as long as it doesn’t sound worried about the growth outlook.
- Oil prices have been supported this week by concerns that measures taken against Russia, including Ukrainian attacks on its energy infrastructure, and conflict in the Middle East could impact supplies.
- The EU is discussing further restrictions to reduce Russia’s energy revenues including sanctions on Chinese and Indian companies that facilitate imports from Russia. EC President von der Leyen said that the EU is looking into fast tracking the end of energy imports from Russia after the US said it needs to stop.
- Industry data showed a large US crude stock drawdown. The official EIA data is out later today and with the IEA forecasting a record market surplus in 2026, this data will be monitored for signs of a rising inventory trend.
- Later the focus is on the Fed (see MNI Fed Preview) but there are also August US housing starts/permits, August UK/euro area CPIs and the Bank of Canada decision (forecast to cut 25bp). In addition to Powell and BoC Governor Macklem, ECB President Lagarde and Board member Cipollone also speak today.
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MNI EXCLUSIVE: Former RBA Staffer On The Cash Rate Outlook
JGBS: Modest Bear-Steepener Ahead Of Tomorrow's 20Y Supply
JGB futures are weaker, -15 compared to settlement levels
- Japan tertiary industry index rose 0.5% in June from a month earlier, compared to economists’ estimate at +0.2%.
- Cash US tsys are 1-2bps richer in today's Asia-Pac session after Friday's bear-steepener.
- (Bloomberg) "Japanese bonds are in for a rough week with Tuesday's 20-year debt sale looming as the next curve disruptor. It's a tricky tenor, neither a benchmark, nor an ultra-long. The duration is one of the least popular for investors with a history of sloppy outcomes which scatter the JGB playing field. Secondary JGB levels don't help either. Buyers at the seven previous auctions this year are underwater on a mark-to-market basis. Even sharply reducing the size of the July debt sale barely improved its overall metrics. Which augurs badly for this week when there is also Japanese CPI data on Friday that is unlikely to knock the BOJ off its rate hike path."
- Cash JGBs are flat to 3bps cheaper across benchmarks. The benchmark 10-year yield is 0.5bp higher at 1.577% versus the cycle high of 1.616%.
- Swap rates are flat to 1bp lower, with swap spreads tighter.
- Tomorrow, the local calendar will see 20-year supply.
EURUSD TECHS: Trading At Its Latest Highs
- RES 4: 1.1851 High Sep 10 2021
- RES 3: 1.1829 High Jul 01 and the bull trigger
- RES 2: 1.1789 High Jul 24
- RES 1: 1.1730 High Aug 13
- PRICE: 1.1709 @ 05:53 BST Aug 18
- SUP 1: 1.1583 50-day EMA
- SUP 2: 1.1392 Low Aug 1 and bear trigger
- SUP 3: 1.1373 Low Jun 10
- SUP 4: 1.1313 Low May 30
EURUSD is trading at its latest highs and a short-term bullish outlook remains intact. Note that moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend. A continuation higher would expose key resistance and the bull trigger at 1.1829, the Jul 1 high. Clearance of this level would resume the uptrend. Support to watch is 1.1583, the 50-day EMA. Major support below rests at 1.1392, the Aug 1 low.
