OIL: Hedge Funds Cut Net Bullish Nymex Diesel Bets to 8-Month Low

Powell has had a net dovish impact on US rates, reversing a hawkish reaction to initially patient rhetoric. The push back towards session highs has come with help from various factors including pushing back on a rate hike question, noting the post-shutdown boost to the 2026 GDP growth upgrade and discussing a weaker payrolls trend when factoring in expected downward revisions along with the labor market “cooling “maybe just a touch more gradually than we thought”. 

• Fed Funds futures implied rates are 0.5-2bp lower since shortly before the FOMC announcement, with about half of that coming since Powell’s press conference.
• Cumulative cuts from an assumed 3.64% effective: 5bp Jan, 13bp Mar, 18.5bp Apr, 32.5bp Jun, 47bp Sep and 54.5bp Dec.
• SOFR futures sit up to +0.04 through 2026 contracts since the FOMC decision, with the day’s gains led by the U6 (+0.07).
• The terminal implied yield of 3.16% (Z6) is 6.5bp lower on the day but only gives back yesterday’s climb to its highest since July – it’s still more ~15bps above levels seen in late November after a recent push higher on reasonable domestic data and global factors.
• An example of patience when asked whether the Fed has taken out sufficient insurance against labor market weakness: "We're going to get a great deal of data between now and the January meeting, and I'm sure we'll talk more about that, and that will the data that we get are going to factor into our thinking.... We did some cutting, and then we paused for a while to work our way through what was happening in the middle of the year. And then we resumed cuts in September.... We're well positioned to wait and see how the economy evolves from here."

• RES 4: 0.6723 High Oct 21 ‘24   
• RES 3: 0.6707 High Sep 17 and a key resistance 
• RES 2: 0.6660 High Sep 18
• RES 1: 0.6654 High Dec 12
• PRICE: 0.6648 @ 16:36 GMT Dec 10 
• SUP 1: 0.6580/6559 High Nov 13 / 20-day EMA 
• SUP 2: 0.6517 Low Nov 27 
• SUP 3: 0.6466/21 Low Nov 26 / 21 
• SUP 4: 0.6415 Low Aug 21 / 22 and a bear trigger 

A strong impulsive bull wave in AUDUSD remains intact, signalling scope for a continuation near-term. Note that moving average studies have recently crossed and are in a bull-mode position, reinforcing current conditions. The pair has pierced 0.6640, 76.4% of the Sep 17 - Nov 21 bear leg. A clear breach of this level would open 0.6707, the Sep 17 high and key resistance. Key support to watch is at 0.6559, 20-day EMA.

• As the FOMC press conference progressed, negative sentiment towards the dollar has re-emerged, with the USD index extending session lows and now down a little more than 0.5%. Gains across the G10 have been broad based and are certainly more balanced than earlier on Wednesday.
• This dynamic has propelled the likes of EUR, AUD and NZD to fresh recovery highs, while the Japanese Yen has been eroding the week’s advance with USDJPY now trading back below the 156.00 handle. GBPUSD is also pressing towards 1.34, while the Swiss Franc and Swedish krona remain the day’s best performers.
• For EURUSD, spot is testing the 1.17 handle for the first time since October 17, keeping the technical bull cycle intact. The recent breach of key short-term resistance at 1.1656, the Nov 13 high and a bull trigger, and today’s extension higher strengthens the underlying bullish sentiment. 1.1728 and 1.1779 represent the next levels on the topside.
• AUDUSD has notably risen above the September 18 high of 0.6660, extending the impressive surge from the November lows to 4.12% amid the more hawkish RBA and firmer risk sentiment. A strong impulsive bull wave in AUDUSD remains intact, signalling scope for a continuation near-term. 0.6707 remains a key resistance point, the September 17 high.
• In similar vein, NZDUSD has extended above pivot resistance at 0.5800, registering a 0.5825 high on Wednesday, while USDSEK (-1.12%) has significantly narrowed the gap to recent cycle lows at 9.1936. A break below here would place the pair at the lowest level since February 2022.