Crude Oil, WTI, Brent, US Dollar, Treasury Yields, Fed, AUD, NZD – Talking Points
- Crude oil has paused in its run higher after US data disappointed
- The US Dollar and Treasuries rallied as perceived haven assets were bought
- If more data is delivered to the downside, where will WTI go?
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Crude oil dipped today after US data revealed a potentially softening economy, raising the spectre of a possible looming recession in the world’s largest economy. The data can be viewed here.
The US Dollar strengthened into the New York close yesterday and continued to gain so far today. The Japanese Yen is the only currency to make ground against the greenback. Markets appear to have looked for safety in perceived safe haven currencies on the weak numbers.
Treasury yields continued to slip slightly lower through the Asian session while 10-year US real yields made a seven-month low. It touched 1.02% overnight, way down from the 1.72% seen last month. At the same time, gold made a twelve-month peak at USD 2,032 but has pulled back today.
Cleveland Federal Reserve President Loretta Mester was interviewed by Bloomberg and noted that in reference to the Fed’s target rate, “we’re going to have to go a little bit higher.”
The Aussie and Kiwi Dollars are the underperformers today and it might reflect the market’s preference for haven assets overall.
APAC equity indices are a sea of red following a soft lead from Wall Street. Futures are pointing to an unsteady start to the North American session.
Crude has retreated further from Tuesday’s 10-week high as concern for a US recession undermines global growth prospects. The WTI futures contract is trading near US$ 80 bbl while Brent is around US$ 84.50 bbl at the time of going to print.
Later today Canada and the US will get some jobs data. Many markets will be closed on Friday but US non-farm payrolls might prove to be a crucial data point after the moves seen yesterday.
The full economic calendar can be viewed here.
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WTI CRUDE OIL TECHNICAL ANALYSIS
WTI crude pierced above the prior peaks at 80.62 and 80.94 but was unable to sustain a close above those levels. This may indicate that the move was a false break.
The market gapped higher on Monday and from a technical perspective, markets sometimes work to fill in gaps. A break below Monday’s low of 79.00 could see this technical event unfold.
Support might lie at the 23.6% and 38.2% Fibonacci Retracement levels at 77.70 and 75.25 respectively ahead of the breakpoints in the 72.25 – 72.45 area.
On the topside, there could be a resistance zone in the 82.50 – 83.30 area where several breakpoints and prior peaks are located.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on Twitter