OIL: Slow End to the Week for Oil
- If oil maintains current level, it will end the week largely where it began.
- After finishing yesterday +2.09%, WTI is lower today by a mere -0.14% and -0.09% for the week.
- The strong gains overnight did little to change the technical picture as WTI remains below all major moving averages.
- Brent is down -0.15% in the Asia trading session, but remains up +0.24% for the week.
- OPEC+ crude oil production moderated in June for the first monthly decline for the year after reaching a 24-month-high in June. Saudi Arabia led the fall in production, easing its output after a surge in June.
- Chinese state-owned and mega-sized private refiners are snapping up Western Russian crude cargoes for Oct. and Nov. arrival as India eases off, according to Kpler (a global trade analytics company provider).
- The risks remain that a less than constructive discussion between US and Russia in Alaska could see a knee-jerk reaction from Trump resulting in increased sanctions against Russia that impact its flow of oil.
- US President Donald Trump warned he would impose "very severe consequences" if Vladimir Putin didn't agree to a ceasefire agreement later this week.
- Despite the imminent threats from the summit, global oil markets could record surplus next year as demand growth slows and supplies swell, the International Energy Agency said, with oil inventories forecast to grow at their fastest pace in 5-years.
- Oil inventories will accumulate at a rate of 2.96 million barrels a day, surpassing even the average buildup during the pandemic year of 2020, data from the IEA's monthly report showed. World oil demand this year and next is growing at less than half the pace seen in 2023.
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NZD: Asia Wrap - NZD/USD Has Broken Support, Risk Is A Move Back To 0.5850
The NZD/USD had a range of 0.5944 - 0.5966 in the Asia-Pac session, going into the London open trading around 0.5945, +0.01%. The USD has surged higher on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. US yields and the USD have both reacted as the market further reduces its rate cut expectations for the year. NZD/USD has broken below its recent support just below 0.6000 and the price action now suggests we could have a look back towards the important 0.5850 support area. Look for supply now on bounces back towards 0.6000 to cap initially.
- (Bloomberg Economics) -- New Zealand’s June price data are likely to show inflation holding in the Reserve Bank of New Zealand’s 1%-3% target band. In May, food prices rose 0.5% month on month, following a 0.8% gain
- "NZ JUNE GOVT. BONDS HELD BY FOREIGNERS RISE TO 62.7%" : BBF
- NZ Milk Prices Rise At Auction For The First Time Since May : Overnight the fortnightly whole milk powder auction saw prices rise 1.7% versus the previous auction result, per GDT. This put prices back to $3928, from $3859 prior.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6000(NZD382m). Upcoming Close Strikes : 0.5932(NZD317m July18). - BBG
- CFTC Data shows Asset Managers added slightly to their newly built longs in NZD +9229, the Leveraged community added slightly to their shorts last week -8654.
- AUD/NZD range for the session has been 1.0942 - 1.0970, currently trading 1.0970. The cross has broken out of its recent range and is now trying to push through the more pivotal 1.0950 area. Dips back to 1.0850/1.0900 should now be supported as the pair tries to build momentum to move higher.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
GOLD: Gold Posts Modest Gains in Asia Trading Day
- Gold edged higher by +0.36% in the Asia trading day after two consecutive days of losses.
- At US$3,336.40 gold remains close to the June high of $3,3432.34.
- With the two day sell off, gold briefly dipped below the 20-day EMA of $3,333.78 but with today's gains trade back above all major moving averages.
Source: Bloomberg Finance LP / MNI
- Gold is up over 28% year to date with underlying options in exchange-traded SPDR gold shares indicating that bullish positioning relative to bearish ones has picked up considerably after reaching a low in early May. The improved sentiment suggests that some investors may be preparing for the next leg higher in the commodity with some forecasters saying that $4,000 is possible this year.
JPY: Asia Wrap - USD/JPY Is Not Backing Off, Eyes The 150.00 Area
The Asia-Pac USD/JPY range has been 148.71 - 149.18, Asia is currently trading around 149.10, +0.15%. USD/JPY surged higher overnight with US yields in response to the US CPI showing clear signs that tariffs are beginning to impact the core goods data. The USD/JPY relentless march higher has been pretty telling, challenging a market positioned the wrong way. This time USD/JPY has not given the JPY longs any respite and the powerful move back above 148.00 does not bode well. Dips should now be well supported in the short-term, will Asset Managers start paring back their extensive JPY longs now ? The first decent buy zone is now back towards the 147.00 area.
- (Bloomberg)- Short-dated options bets turned net bearish on the yen to the dollar on Tuesday for the first time since September of 2022 as the Japanese currency hit its lowest spot level since the aftermath of Liberation Day. The moves indicate the downdraft in the Japanese yen is set to extend.
- “Japan’s bond market is facing a potential Liz Truss moment as the risk of a ruling coalition defeat in Sunday’s election fuels concerns over fiscal policy. Yields on bonds with maturities of 20 years and beyond have risen at least 20 bps this month, part of a wave of selling in global bond markets as investors increasingly worry about government finances.” - BBG
- USD/JPY is now breaking above the highs of this year's range and implies the move could have more to play out. The Market is long JPY and should the USD continue to correct higher the risk is a move back above 150.00 to further challenge the conviction of the shorts.
- Options : Close significant option expiries for NY cut, based on DTCC data: 149.00($910m).Upcoming Close Strikes : 145.50($1.29b July 21).
- CFTC data shows Asset managers reduced their JPY longs slightly +89331, while leveraged funds have almost squared their newly built JPY longs +5224.
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
