Crude Oil, WTI, Brent, US Dollar, Debt Deal, T-Bills, AUD/USD, USD/JPY – Talking Points
- The crude oil price retreated inside the range today after trying higher
- The debt ceiling deal appears to be heading in the right direction for a resolution
- US Dollar movements might determine crude direction. Will a debt deal undermine USD?
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The crude oil price slipped on Tuesday but remains within a range despite the prospect of the debt ceiling issue being resolved this week.
It is being reported that US President Joe Biden and House Speaker Kevin McCarthy are actively encouraging lawmakers to vote in favour of the debt ceiling agreement when it is presented to the floor on Wednesday.
Markets have breathed a sigh of relief, most notably at the very short end of the debt market. The T-Bill maturing on the 6th of June is back to where it was prior to the debt ceiling concern alarming markets. It traded as high as 7.10% last week but it is around 5.15% today.
The US Dollar has steadied so far today and has made ground against the Aussie and Kiwi Dollars.
Australian building approvals for April were a big miss at -8.1% month-on-month while Japan’s jobless rate eased lower to 2.6% for the same month, down from 2.8% prior and estimates of 2.7%.
Bank of Japan Governor Kazuo Ueda appeared before Parliament today and said that the ultra-loose monetary policy stance will remain for now but hinted toward a change in tack if inflation was to fall toward 2% later this year.
USD/JPY has pulled back from yesterday’s 6-month peak, trading near 140 at the time of going to print.
The geopolitical space remains somewhat murky this week with China declining an invitation from Washington for their respective defence ministers to meet.
APAC equity indices are generally in the red although South Korea’s KOSPI index is in the green. Wall Street futures are pointing toward a slightly positive start to their cash session as they return from yesterday’s Memorial Day holiday.
Crude oil market traders are starting to focus on the OPEC+ meeting that will start on June 4th.
There have been some mixed messages from member states but there is speculation that another cut in production might be in the offering. When they cut in early April, the oil price gapped higher. See the chart below.
Today, the WTI futures contract is under US$ 72.50 bbl while the Brent contract is a touch above US$ 76.50 bbl. Elsewhere, spot gold is slightly softer, trading near US$ 1,940.
Looking ahead, after Swiss GDP figures, the Eurozone and the US will see consumer confidence data.
The full economic calendar can be viewed here.
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WTI TECHNICAL ANALYSIS
WTI crude oil has remained in a 69.41 – 74.73 range for three weeks which is well within the broader range seen over the last six months.
This range trading environment has been tricky for traders with several false breaks. That is when a new high or low is made, only for the price to abruptly move back inside the range.
Resistance could be at the prior peaks of 74.73, 76.92 and 79.18. On the downside, support might be at the previous lows of 69.41, 66.82, 66.12, 64.36, 63.64 and 62.43.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCarthyFX on Twitter