OIL: Oil in Standoff Between Reserve Release and Hormuz Closure
- This week may go down as one of the most volatile periods in energy history, with prices undergoing a parabolic spike followed by a partial retreat as the world’s emergency response mechanisms were triggered.
- The week began with a historic shock as Brent crude surged toward $120/bbl on Monday. This followed reports that nearly 20 million bpd of supply—one-fifth of the global total—was effectively stranded due to the closure of the Strait of Hormuz amidst the escalating US-Iran conflict.
- In a desperate bid to prevent a global recession, the International Energy Agency (IEA) announced a record-breaking release of 400 million barrels from strategic reserves on Wednesday. This intervention helped pull prices back from their $120 peak to stabilize near the $92–$100 range, though markets quickly assessed this as not enough.
- By mid-week, the narrative shifted to production loss as storage tanks in the Persian Gulf reached maximum capacity due to the shipping blockade. This saw producers in Saudi Arabia, Kuwait, and the UAE forced to cut output by an estimated 8 to 10 mb/d.
- The IEA and OPEC both issued rare downward revisions to demand forecasts this week. High prices and widespread flight cancellations in the Middle East are expected to wipe out 1 mb/d of global demand in March and April, creating a stagflationary drag on the global economy.
- Brent has traded in a range of US$81.16 - $119.50 and is currently near US$100.24 bbl - a rise of +8.1% for the week.
- WTI has traded in a range of US$76.73 - $119.48 and is currently near $95.32 - a rise of +4.8% for the week.
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FOREX: USD - BBDXY Testing 1175-1180 Into Employment Data
The BBDXY has had a range today of 1179.42 - 1183.25 in the Asia-Pac session; it is currently trading around 1179, -0.25%. The USD has fallen below most short-term supports and is looking to the lows seen in January now. It does not take a lot for the sellers to come back to market as nobody wants to miss out on this trade. The break lower in US yields is just adding to the USD headwinds and the market will be bracing for more bad news from the employment data tonight. On the day, the first resistance is toward the 1185-1187 area and then 1195 where I suspect we could see sellers return. A sustained break below 1175-1180 could potentially signal the start of another leg lower targeting 1150 first and then potentially 1115.
- EUR/USD - Asian range 1.1886-1.1915, Asia is currently trading 1.1915. The pair is consolidating around 1.1900 as the USD comes back under pressure and we await US employment data tonight. Price action has been pretty constructive after the initial sell-off and the support just below 1.1800 proved to be solid, can it now build some momentum from that base ? On the day, the first support is back toward the 1.1860-1.1890 area and then 1.1770-1.1800.
- GBP/USD - Asian range 1.3632-1.3670, Asia is currently dealing around 1.3665. The pair like everything is trying to bounce as the USD struggles. GBP looks like 1.3580-1.3730 to me for now as we wait to see if the big USD could potentially break lower. Should this play out then a move back above 1.4000 is back on the cards.
- Cross asset : SPX +0.30%, Gold $5057, US 10-Year 4.14%, BBDXY 1179, Crude Oil $64.48
- Data/Events : Italy Industrial Production
Fig 1: GBP/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
GOLD: Bearish Momentum Remains, Steadies Above $5,000
- Weaker than expected overnight data in the US sees gold holding above $5,000 today as investors position for rate cuts in the US.
- Gold has generally trended higher today in Asia, up +0.80% at US$5,058 - trading in a $5,026 - $5,060 range.
- Gold may climb to $6,000 an ounce by the end of the year as macroeconomic and geopolitical risks persist, according to BNP research (per BBG). This is one of the highest forecasts for gold with ranges of around $5,000 to $6,000 most prevalent.
- Gold short term momentum still remains bearish according to the MACD with the MACD (white) line below the Signal (red) line, a bearish sign.
- The volatility this month for gold seems far from over as we look ahead to non farm payrolls for a steer on US interest rates and the Trump and Netanyahu meeting on Iran.
NZD: NZD/USD - Dragged Back Toward 0.6100 As The USD Gets Hit
The NZD/USD had a range today of 0.6037-0.6066 in the Asia-Pac session, it is currently trading around 0.6065, +0.33%. The NZD is pushing above its overnight highs that saw its momentum stall as the USD trades poorly into NFP. On the day, the NZD bulls will be hoping the pair can maintain its upward momentum to test the pivotal 0.6100 area. The first support is back toward 0.6025-0.6045 and then the 0.5900-0.5950 area. A sustained break back above 0.6100 could potentially open up a move back toward the 0.6400-0.6600 area and then beyond.
- MNI - Westpac Expects RBNZ To Raise Rates More Quickly In 2027: Westpac now expects the RBNZ to raise rates more quickly in 2027 (as spare capacity is exhausted). It maintains the start of the hiking cycle is expected in Dec of this year. The next RBNZ meeting is on Feb 18, next Wednesday. Market pricing, per OIS markets, is very flat for the first few meetings this year (around 2.25%, the current target rate). A full 25bps hike is priced by around the Oct meeting this year.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5900(NZD301m Feb16), 0.6200(NZD430m Feb 16) - BBG
- The NZD/USD Average True Range for the last 10 Trading days: 61 Points
Fig 1: NZD/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
