COMMODITIES: Short-Term WTI Future Gains Still Considered Corrective
A downtrend in WTI futures remains intact and short-term gains are considered corrective. The move down that started Apr 23 signals the end of the correction between Apr 9 - 23. That cycle higher allowed an oversold condition to unwind. Attention is on $54.67, the Apr 9 low and a bear trigger. Clearance of this level would resume the downtrend and open $53.72, a Fibonacci projection. Key resistance to watch is $63.88, the 50-day EMA. Gold has recovered from its recent lows. The rally suggests the correction between Apr 22 - May 1, is over. A continuation higher would refocus attention on key resistance and the bull trigger at $3500.1, the Apr 22 high. Clearance of this level would confirm a resumption of the primary uptrend. Key short-term support has been defined at $3202.0, the May 1 low. A break of this level is required to signal scope for a deeper retracement.
- WTI Crude up $0.49 or +0.84% at $58.54
- Natural Gas up $0.04 or +0.99% at $3.656
- Gold spot down $26.21 or -0.78% at $3338.74
- Copper down $6.85 or -1.47% at $458.9
- Silver down $0.13 or -0.41% at $32.327
- Platinum down $2.32 or -0.24% at $976.61
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FOREX: AUD Remains Vulnerable to Tariff Conflict Intensification
- Stronger risk sentiment during Asia hours has prompted some moderate weakness for the US dollar, and has elevated the high-beta antipodean currencies to the top of the G10 board.
- AUDUSD is up 1.3% at 0.6063 but the looming deadline for further US tariff retaliation against China threatens the latest recovery, with the technical outlook for the pair remaining bearish.
- More broadly, ING "would be cautious in chasing big rebounds in high-beta currencies, and especially oil-sensitive currencies. Trump has given little signs of scaling back protectionism, and there is a risk that markets are again erring on the side of optimism.
- For AUDUSD, yesterday’s low print of 0.5933 matched closely with an initial technical support, the 1.764 projection of the Sep 30 - Nov 6/7 price swing. This will remain the key short-term mark on the downside. Below here, round number support at 0.5900 and another projection level at 0.5830 will garner attention. To the upside, initial resistance stands at 0.6127, the Apr 7 high.
- On the local calendar, Westpac consumer confidence and NAB business confidence showed decline from prior prints. Consumer inflation expectations for April are due Thursday.
GILTS: 10s30s above 72bp - a level we haven't closed 2 days above since 2016
- 2-year gilts continues to outperform both USTs and Schatz this morning, largely due to the Guardian article out earlier with comments from former MPC members (who were both dovish) calling for larger / earlier cuts - see 9:00BST comment for our views on that. The 1.25% Jul-27 gilt has seen yields fall as low as 3.712% today from a close yesterday of 3.797% (an 8.5bp move at it's maximum today) although around half of the move has been retraced and we now trade around 3.75% at writing.
- We are also seeing 10s30s steepen more for gilts than for Germany or the US ahead of the 4.375% Jul-54 gilt auction (with the bidding window due to close at 10:00BST). The steepening of 10s30s has reached new highs for gilts (but not the other two markets this morning). 10s30s are trading around 73.6bp at writing - moving above 72bp for the first time since 2024. Note that we haven't closed two consecutive days above 72bp since 2016 - so this is a significant level.
- This leaves 10-year gilts outperforming Bunds this morning with a steepening of the curve.
- The auction is the obvious near-term focus but we will also hear from Lombardelli after gilts close later today.
EQUITIES: Estoxx Risk Reversal
SX5E (16th May) 4200/5000 RR, bought the put for 33.5 in 8.5k.
