EURUSD TECHS: Trend Needle Points North

Oil prices continued rallying today after rising sharply on Tuesday following the EIA’s downward revision to its expectations for US shale production this year because of lower prices. Today’s increase in crude has been driven by news that US-China trade talks will occur this week with US Treasury Secretary Bessent and Trade Representative Greer meeting China’s Vice Premier Lifeng in Switzerland on the weekend. This has helped boost the US dollar (USD BBDXY index +0.3%).

• WTI is up 1.1% to $59.73, close to the intraday high, while Brent is 0.9% higher at $62.72. Both are currently around 2.4% higher this week. Benchmarks declined sharply over recent weeks on concerns that increased protectionism and current uncertainty would weigh on global energy demand.
• Bessent noted that current tariff levels are “unsustainable” and that de-escalation with China needs to occur before they “can move forward”.
• Meanwhile, China announced further stimulus and measures to support property & equities today. The PBoC cut the SLF rates used for financial institutions’ short-term funding, the 7-day reverse repo and reserve requirements. China is the world’s largest oil importer.
• Official EIA data are published later and with the EIA downward revision to US production and the industry-reported 4.49mn barrels stock drawdown last week, it is likely to continue to be monitored closely. Signs of a reduction in demand due to current uncertainty will also be considered.
• Later the focus will be on the Fed decision, which is widely expected to leave policy unchanged. March German factory orders and euro area retail sales print. 

China began its economic support today with a range of various measures announced to support the economy, especially in the face of 145% tariffs from the US.  The key PBOC announcement being a 0.10% in the interbank funding rate and a 0.50% reduction in the RRR.  In September the concept of the "national team" was created which effectively is key asset management companies through which support for equity markets will occur. Today sees the addition of two more entities being China Chengtong Holdings, China Reform Holdings and Central Huijin Investment Ltd.  The PBOC also announced two new funding schemes of up to CNY800bn to support the stock market also.

• Markets liked the news with the Hang Seng up +0.49%, CSI 300 +0.48%, Shanghai up +0.65% and Shenzhen up +0.47%.
• In the first day back post holidays, the KOSPI is up also by +0.33%.
• In Malaysia the FTSE Malay KLCI is up +0.42% whilst the Jakarta Composite continues its good run rising +0.90%.
• Singapore’s FTSE Straits Times is higher by just +0.07% and the PSEi in the Philippines is up +1.43% on improving local data.
• As news of the escalation of action between India and Pakistan filters through the market reaction in India has been somewhat muted.  The NIFTY 50 is lower by -0.30%, having fallen -0.33% yesterday.

ACGBs (YM +6.0 & XM +6.5) are stronger and near Sydney session bests on a local data-light session. The local calendar will be empty for the rest of the week.  

• Cash US tsys have twist-flattened, pivoting at the 20-year, with benchmark yields 2bps higher to 1bp lower.
• The FOMC today will be watched closely, MNI Economist - "The FOMC will extend its series of rate holds to a third meeting in May, keeping the Fed funds target rate at 4.25-4.50% while maintaining its forward guidance in the Statement. As the FOMC awaits clarity in both government policy and the data on the degree to which one if not both dual mandate targets will be missed, most participants will continue to support a holding pattern until there is a clearer signal to act."
• Cash ACGBs are 6-7bps richer with the AU-US 10-year yield differential at -4bps.
• The bills strip has bull-flattened, with pricing flat to +8.
• RBA-dated OIS pricing is flat to 7bps softer across meetings today, with mid-2026 leading. A 50bp rate cut in May is given a 4% probability, with a cumulative 107bps of easing priced by year-end.
• The AOFM plans to sell A$700mn of the 2.75% 21 November 2029 bond on Friday.