OIL: Crude Rallies, Worried What US Russia Deadline Will Mean For Supply
Oil prices rose sharply again on Tuesday bringing gains to over 6% for the week. The move signals market worries that if Russia fails to meet the new 10 day deadline to end hostilities in Ukraine, which is clearly possible, then US measures against it and those who buy its oil could significantly impact global supplies.
- Polymarket reported an increase in the odds of increased US sanctions on Russia by September 15 to 70%. The market reaction to the shift in the deadline for a truce is in line with this data. US President Trump appears not concerned about the impact suggesting the US will increase its oil output.
- Former Russian President Medvedev said that Trump’s “ultimatums” were a “step towards war”, per Russian state media. The Kremlin was clear that it is going to ignore the deadline.
- WTI rose 3.8% to $69.25/bbl after a high of $69.76 leaving the benchmark up 6.3% this week and 8.5% in July. It broke above resistance at $69.41 but the move wasn’t held. Initial support is at $64.85. If the break is sustained, then the next level to watch is $79.40, 23 June high. Prices have started Wednesday around $69.29.
- Brent was 3.9% higher at $72.76/bbl, above initial resistance at $72.66, also to be up 6.3% this week and 9% this month. It reached a high of $73.08.
- Bloomberg reported that there was a crude stock build of 1.5mn barrels last week in the US, according to people familiar with the API data. In terms of products, gasoline fell 1.7mn barrels while distillate rose 4.2mn. The official EIA data is out on Wednesday.
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NZD: NZD/USD - Looking To Build Momentum To Extend Beyond 0.6100
The NZD had a range Friday night of 0.6037 - 0.6078, Asia is trading around 0.6060. A small pullback on Friday as consolidation continues on a 0.6000 handle. The USD has broken some key levels and is still looking vulnerable, this could see the NZD/USD continue to probe the 0.6100 area looking to gain some momentum to ultimately break higher.
- Bloomberg) -- China firmly opposes any countries reaching trade agreements with the US that would sacrifice Chinese interests in exchange for tariff relief, according to a statement from the Ministry of Commerce on Saturday night.
- “If such a situation occurs, China will not accept it and will take resolute countermeasures to safeguard its legitimate rights and interests,” an unidentified spokesperson was cited saying in response to a media query about recent US trade talks with other nations. “It has been proven that only by firmly upholding its principles and positions can a country truly protect its legitimate rights.”
- A huge bounce from sub 0.5900 and the NZD has now established a foothold above 0.6000, with the USD breaking lower the NZD/USD looks to be building for a potential break higher of its own. A clear break of 0.6100 could provide the momentum to begin a larger move higher, initially targeting the 0.6400 area.
- CFTC Data shows Asset Managers have cut their shorts and are now beginning to build a long in NZD +12195, the Leveraged community maintained their short that just been added to -11981.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5850(NZD404m July 1), 0.5800(649m July2)
- Data/Event : Filled Jobs, ANZ Activity Outlook & Business Confidence
Fig 1: NZD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
CNH: USD/CNH Within Recent Ranges, CNY Index Lower, Little Change Seen In PMIs
USD/CNH tracks just under 7.1700 in early Monday dealings, after losing a little ground versus the USD on Friday. Broader USD indices were firmer on Friday, albeit up only marginally from recent cycle lows. Spot USD/CNY finished up at 7.1726, while the CNY CFETS basket tracker lost 0.16%, to be at 95.36, which is fresh cycle low.
- For USD/CNH technicals, downside focus will be on last week's low of 7.1525. A fresh break lower could see early 2024 Nov lows under 7.1000 ultimately targeted. On the topside, the 20-day EMA, close to 7.1820, has been an upside resistance point through June.
- Recent momentum in US-CH yield differentials has been to the downside, albeit we saw some stability on Friday, which likely aided the USD at the margins. The China to global equity ratio has tracked a little lower, but remains above recent lows from early June.
- Focus will remain on US-China trade relations, although further strong progress in the near term may not be forthcoming, as US focus rests on finalizing deals elsewhere (with talks with Japan and India in focus).
- On the data front today, we have the official PMI prints for June. The manufacturing outcome is expected at 49.6 (49.5 printed in May), while non-manufacturing is expected at 50.3, unchanged from the June outcome.
AUSSIE 10-YEAR TECHS: (U5) Bear Cycle Remains Intact For Now
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.795 @ 16:02 BST Jun 27
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures rallied well on the RBA rate decision, reversing a small part of recent weakness. Recent price action pressured prices through to new pullback lows last week. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. To the upside, a recovery of recent losses would shift attention to resistance at 96.207, a Fibonacci retracement point.
