OIL: Prospect Of Further Sanctions Drives Crude Higher
Oil prices were stronger as the market considered the impact of an increase in sanctions on Russia and possibly Iran. However, with OPEC expected to increase output substantially again in July as well as the ability to circumvent restrictions, an extension of sanctions is unlikely to dent excess supply. The EU has imposed additional sanctions on Russia and it and the US are considering more. The stronger US dollar didn’t pressure crude (USD BBDXY index +0.3%).
- WTI rose 1.6% to $61.86/bbl, off the intraday high of $62.54, and has started today slightly higher at $61.94. It approached resistance at $62.63, 50-day EMA, yesterday. The bear trigger is at $54.33. It is up 7.4% this month.
- Brent is up 1.3% to $64.90 after reaching $65.63 during the US session. It is now 6.4% higher in May. While the benchmark is in consolidation mode, the medium-term trend remains bearish with the bear trigger at $58.00. Initial resistance is $66.05, 50-day EMA.
- Bloomberg reported that US crude inventories fell 4.24mn barrels last week, according to people familiar with the API data. Gasoline stocks fell 528k ahead of the long weekend, while distillate rose 1.3mn. The official EIA data is out on Thursday.
- Russia will present its “memorandum” at talks with Ukraine in Istanbul on June 2. Previously it has demanded it retain all the territory it occupies plus the rest of those provinces as well as Ukraine’s neutrality.
- Chevron received a licence to maintain its assets in Venezuela but production will have to stop as the US tightens sanctions on the regime. However, El Nacional reported that an apparently scrapped tanker completed a 2-month trip carrying Venezuelan crude.
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GOLD: Gold Jumps on Poor US Data
- Gold climbed into the US open to finish ahead having been lower for most part of the trading day.
- Gold finished higher by +0.73% at US$3,343.98, having been as low as $3,268.23 earlier in the day.
- As the USD continues to soften and bond yields rallied ahead of key US economic data on Wednesday, gold jumped as expectations for weaker data grew.
- Overnights’ data release, the Dallas Fed. Manufacturing Activity, fell to its lowest in 5 years with survey respondents showing executives describing the current situation as "chaos" as supply line disruptions decimate activity.
- This has reduced expectations for Wednesday’s data which sees employment , inflation and growth releases.
- Gold had started the week in the Asian trading session on the back foot, trending downwards before the Texas data which has refocused attention on the possibility that already the trade war may be showing up in US data.
JGB TECHS: (M5) Off Highs, But Underlying Strength Persists
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.95 - High Apr 7
- PRICE: 140.60 @ 16:37 GMT Apr 28
- SUP 1: 139.38 - 1.0% 10-dma envelope
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs are holding the bulk of the recent strong bullish reversal, rejecting any test of fresh cycle lows for the M5 contract. This defies the bearish momentum studies drawn on the longer-term chart, clearing moving-average resistance to print 142.40 at the new upper level. To the downside, sights are on 136.57, a Fibonacci projection. 144.48 is the medium-term target on any recovery.
NZD: NZDUSD - Consolidating
The NZD had a range overnight of 0.5928 - 0.5982, Asia is opening around 0.5975.
- “US Treasury Secretary Bessent said “all aspects” of the US government are in contact with Beijing, while reiterating his view that it's up to them to take the first step in de-escalating the trade fight.”(per BBG)
- (Bloomberg) -- New Zealand Finance Minister Nicola Willis gave a pre-budget speech Tuesday in Wellington. Says “Treasury has reduced assumptions for real GDP growth in 2025 and 2026.”
- “New Zealand’s economy will still be growing, but not as fast as forecast a few months ago”
- Says tariff announcements by the US government, countervailing tariffs being imposed by China and an uncertain path for future tariffs and exemptions have created volatile global economic conditions, “with forecasters around the world agreeing that global growth will be lower this year and next year than they were previously predicting”
- Key change is cutting Budget 2025 operating allowance to NZ$1.3b from NZ$2.4b.
- The NZD tried lower initially into London but found good demand back towards the 0.5920 area.
- The price action continues to suggest that dips will probably find demand, first support on the day is 0.5900 then 0.5800/50.
- CFTC data show Asset managers have slowed their pace of buying last week, Leveraged funds though have been using dips to reduce their shorts.
- Data : Filled jobs for March coming up
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
