OIL: : Crude Stabilises Ahead Of OPEC As Geopolitical Developments Return
Oil prices fell sharply this week ahead of the 5 October OPEC meeting to decide November’s production target. They appear to have stabilised during today’s APAC session with WTI up 0.5% to $62.12/bbl after a high of $62.54 which followed a WSJ report that the US would give Ukraine intelligence to support its strikes on Russian energy infrastructure and also encouraged NATO to do the same. Brent reached $66.15/bbl but is now around $65.70/bbl also to be 0.5% higher. The US dollar is flat.
- Bloomberg reported that following the G7 finance ministers meeting an agreement on substantial additional sanctions on Russia’s means to finance its war in Ukraine is close. The group has also decided on more assistance for Ukraine.
- OPEC is expected to continue to unwind previous output reductions when it meets this weekend. It increased the October target by 137kbd and at least that amount is likely in November. This comes in addition to the resumption of flows from Iraqi Kurdistan to Turkey which had been halted since March 2023.
- Later the Fed’s Logan & Goolsbee and ECBs’s de Guindos & Montagner speak. Private sector US data will still be released which today includes September Challenger job cuts. Swiss September CPI, French August budget balance and euro area August unemployment rate also print.
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FOREX: Asia FX Wrap - USD Finds Some Demand Just Above Support
The BBDXY has had a range of 1200.18 - 1202.53 in the Asia-Pac session, it is currently trading around 1202, +0.15%. The USD continues to find demand just above its pivotal support. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows. The USD is holding just above this support but continues to trade with a heavy tone, not sure we get a clear break though until the market sees what the NFP print is, in order to allocate more risk.
- EUR/USD - Asian range 1.1692 - 1.1718, Asia is currently trading 1.1695. The pair is trading sideways for the moment. First support is back towards 1.1550, a break back above 1.1850 needed to regain upward momentum.
- GBP/USD - Asian range 1.3523 - 1.3549, Asia is currently dealing around 1.3525. The pair is consolidating just above the 1.3500 area. Back in the middle of its recent 1.3350-1.3650 range, the USD’s fate will have a direct impact on which side is tested.
- USD/CNH - Asian range 7.1323-7.1437, the USD/CNY fix printed 7.1089, Asia is currently dealing around 7.1420. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
- Cross asset : SPX -0.10%, Gold $3495, US 10-Year 4.245%, BBDXY 1202, Crude Oil $64.92
- Data/Events : Italy PPI, EZ CPI, France Budget Balance, Spain Unemployment
Fig 1: BBDXY Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
GOLD: Gold Back Below $3500 After Reaches New Record High
Gold prices spiked to a new record high of $3508.73/oz earlier in today’s APAC session on increased expectations of a September Fed easing. It is also benefiting from concerns regarding Fed independence. It rose above the bull trigger at $3500.1, 22 April record, but has been unable to hold the break. Bullion is now up 0.6% to $3497.0 despite a stronger US dollar (BBDXY +0.2%) and slightly higher yields.
- UBS believes that gold will continue trending higher driven by softening growth, rate cuts and geopolitical/economic uncertainty, according to Bloomberg.
- After rising 2.5% on Monday, silver is up another 0.3% to $40.82 today, holding just above initial resistance at $40.798. It reached a high of $40.850 after a low of $40.558. Bloomberg reported that in August ETF buying of silver rose for the 7th straight month.
- Silver has also been added to the US list of critical minerals. It is a key component of solar panels. The Silver Institute is expecting 2025 to be the fifth year the metal is in deficit, Bloomberg reported.
- Equities are mixed with the S&P e-mini slightly lower, Hang Seng down 0.6% but KOSPI up 0.8%. Oil prices are stronger again with WTI +1.4% to $64.92/bbl. Copper is little changed.
- Later the ECB’s Elderson and Machado appear. US August manufacturing PMI/ISM, July construction, euro area August CPI and July French budget data print.
NZD: Asia Wrap - NZD/USD Sellers Return Above 0.5900
The NZD/USD had a range of 0.5883 - 0.5908 in the Asia-Pac session, going into the London open trading around 0.5885, -0.30%. The NZD has topped out above 0.5900 for now as the USD finally sees some demand return. The NZD has bounced off its support toward 0.5800, sellers should continue to be around looking to fade the move back towards the 0.5950/0.6000 area initially. Should the USD break lower and gain momentum this would complicate this trade and then it would be prudent to rotate the NZD shorts into the crosses.
- Goods Terms Of Trade Continues Moving Higher: NZ saw the largest improvement in the merchandise terms of trade in Q2 since Q1 2024. It rose 4.1% q/q, the sixth consecutive quarterly increase, to be up 12.2% y/y after 10.3% y/y in Q1. While domestic demand remains soft, this rise in the terms of trade will be providing some welcome support to growth. The services terms of trade fell 0.4% q/q but rose 1.0% y/y after falling 7.3% y/y.
- "New Zealand Treasury Says Domestic Economic Conditions Are Soft. The data inflow has improved at the margin over the past fortnight signaling better times ahead, but current economic activity is soft, the Treasury Dept. says in its Fortnightly Economic Update published Tuesday in Wellington." - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5700(NZD500m). Upcoming Close Strikes : 0.5700(NZD384m Sept 3) - BBG
- CFTC Data of last week shows Asset Managers added slightly to their new short position in the NZD -4743(Last -3198), the Leveraged community have almost completely exited their short -225(Last -4004).
- AUD/NZD range for the session has been 1.1095 - 1.1112, currently trading 1.1110. Momentum higher looks to have stalled above 1.1100 for now, look for demand to return on a dip back towards the 1.1000 area.
Fig 1: NZD/USD Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
