OIL: Crude Holds Gains As Watching Geopolitical Developments
Crude has held onto Monday’s gains supported by geopolitical risks related to Ukraine/Russia and Venezuela. Benchmarks rose around 1.5% and are off their intraday lows to be slightly higher in Tuesday’s APAC session. WTI is up 0.2% to $59.42/bbl after falling to $59.33 off a high of $59.67. Brent is 0.1% higher at $63.21/bbl off the session low of $63.14. The US dollar is little changed.
- US special envoy Witkoff is in Russia to discuss changes to the original peace plan. Secretary of State Rubio met with Ukrainian officials in Florida on the weekend. President Zelenskyy has noted that an agreement on territory is going to be very difficult, as Ukraine is not prepared to cede unoccupied areas to Russia.
- Ukraine struck two Russian tankers and apparently also a wharf used to load Kazakh crude in the Black Sea, which has now stopped. It also continues to target Russian refineries. Diesel prices trended lower through the last 10 days of November but have stabilised this week.
- There are reports that there was a meeting at the White House on Venezuela later on Monday. President Trump has suggested closing Venezuelan airspace and may have offered safe passage for Venezuelan President Maduro and his family if they leave. Venezuela was the 17th largest exporter of oil in 2023 (IEA).
- Later the Fed’s Bowman testifies before the House Committee but given that the FOMC blackout has begun ahead of the 10 December decision, she is not expected to say anything on monetary policy or the economy. There is little data in the US with November Wards vehicle sales the only release.
- November euro area CPI and October unemployment rate are released and the ECB’s Buch speaks. The BoE publishes its Financial Stability Report. CFTC market positions data are scheduled to print.
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
