Sample Category Title

For the 24 hours to 23:00 GMT, Crude Oil rose 0.44% against the USD and closed at USD58.97 per barrel, after the Energy Information Administration (EIA) report indicated that US crude oil stockpiles declined by 12.8 million barrels to 469.6 million barrels in the week ended 21 June 2019.

In the Asian session, at GMT0300, the pair is trading at 59.22, with oil trading 0.42% higher against the USD from yesterday’s close.

The pair is expected to find support at 58.60, and a fall through could take it to the next support level of 57.99. The pair is expected to find its first resistance at 59.88, and a rise through could take it to the next resistance level of 60.55.

Crude oil is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

New Zealand ANZ Business Confidence dropped to -38.1 in June, down from -32.0. Agriculture scored worse at -54.5, followed by construction at -42.3 and manufacturing at -41.4. Activity Outlook also dropped from 8.5 to 8.0.

ANZ noted: "The outlook for the economy is murky. As things stand, there is no reason for the economy to fall into a deep hole. Commodity prices are good, interest rates are at record lows, and the labour market is tight. But the economy is facing credit and cost headwinds and the global outlook is deteriorating. On the latter, for all that our commodity prices have been resilient, the risks are looking decidedly one-sided. Upside risks to growth appear few and far between and with the inflation outlook not consistent with the target midpoint we expect two more OCR cuts this year."

Full release here.

BoJ Deputy Governor Masazumi Wakatabe said told business leaders in Aomori that "the ultimate objective of monetary policy is the sound development of the economy. In other words, monetary policy won't be normalized until the economy and prices are in a normal state." And he pledged "the BoJ will guide policy to ensure Japan never falls into deflation again."

Meanwhile, Wakatabe urged " increased attention to heightening risks to the BoJ's scenario". In particular, prolonged US-China trade tensions would not just hit the global economy through higher tariffs. Sentiments would be dampened and businesses could be discouraged from investing.

The Trump-Xi meeting on sideline of G20 in Japan is confirmed to be held at 0230 GMT on Saturday. The South China Morning Post in Hong Kong reported that conditions on stopping further escalation in tariffs are already agreed upon. And the agreement will be laid out after the meeting in form of coordinated press releases, rather than joint statement.

Public comments regarding 25% tariffs on USD 300B of Chinese imports, essentially all untaxed, would end on July 2. Trump could formally make a decision to start imposing the tariffs very soon, should trade negotiations collapse once again. Trump also made himself very clear yesterday and said "I would do additional tariffs, very substantial additional tariffs, if that doesn't work, if we don't make a deal."

San Francisco Fed President Mary Daly said yesterday that she is uncomfortable with current direction of inflation. And, "headwinds, slowing growth could strengthen argument for rate cut." And that could help "bring the economy back to potential growth, support return of inflation to target"

However, she emphasized that it's a "challenging time" and "risk management is on my mind". wants to "see another US jobs report to see if last report was noise or a more meaningful sign." Also, the next several weeks will be key to showing how much of an argument there is for a rate cut.

STOCKS

Like the Fed would want to wait and watch before cutting rates, the equity market also seems to be in wait and watch mode ahead of the US-China meeting this weekend. The outcome of this meeting would be key in setting the trend in equities going forward. However, at the moment, the broader bullish view on equities continues to remain intact.

Dow (26536.82, -11.4, -0.04%) remains lower and has dipped marginally. Our view remains the same. Dow can test the support at 26450 and bounce thereafter. But a break below 26450 (less preferred) will see the fall extending to 26250. However, our broader view remains bullish for a rise to 27200-27500

The support at 12170 on the DAX (12245.32, +16.88, +0.14%) is holding well at the moment as expected. The index is likely to reverse higher and keep the broader bullish view intact to test 12500-12600 on the upside. However, as mentioned yesterday, the possibility of the current downmove extending to 12150-12130 cannot be ruled out before we see a fresh upmove.

Nikkei (21255.29, +168.70, +0.80%) has bounced sharply today thereby negating a fall to 20900 which we had mentioned yesterday. While above 21000, a rise to 21400-21500 is likely in the near term. Such a rise will turn the broader bias bullish for the index to break 21500 and test 21750 on the upside.

Shanghai (2,998.7, +22.68, +0.76%) can test the 3010-3020 resistance zone. Inability to break 3020 can keep the index in a sideways range between 2950 and 3020 for some time. The bias is however, bullish to see a break above 3020 toward 3050 and 3100 in the coming days.

Nifty (11847.55, +51.10, +0.43% ) has risen and is showing signs of strength. As cautioned yesterday, our bearish view for a fall below 11600 is getting negated. Nifty can break 11900 and rally to 12000-12100 in the coming days.

Sensex (39592.08, +157.14, +0.40%) is not looking as strong as the Nifty at the moment. However, a strong break above 39750 can boost the momentum and will pave way for a fresh rise to 40000 and 40250.

COMMODITIES

Overall commodities are mixed. Crude prices trade higher while Gold and Silver could consolidate for a few sessions before resuming its rise. Copper looks bullish.

US weekly stock inventory data showed a draw of 12.8 mln barrels against the expected draw of 1.077mln barrels, pulling up Crude prices as expected.

Brent (66.21) has risen sharply and could test immediate resistance near 67. As mentioned over the last couple of days, a break above 67 could pull Crude prices into the 67-69 resistance zone from where a fall could be seen in the medium term.

Nymex WTI (59.15) has similar resistance near 60 which is likely to produce a rejection in the near term.

Gold (1411.60) is holding below 1430 for now and could possibly spend some time in the 1430-1400 region for sometime (maximum possible extension to 1390/80) before again resuming it's upward rally in the medium term. Overall view is bullish for Gold in the longer run while we may expect some consolidation just now.

Silver (15.31) is almost stable. We keep intact our view of testing 15 on the downside before bouncing back towards 15.25/50 in the longer run.

Copper (2.7210) is also stable and could be headed higher towards 2.80/85 from where a rejection is possible. Outcome from the US-China talks due on Saturday could bring in some volatility in Copper prices in the next week.

FOREX

Currencies are mixed.Dollar Index and Euro are stable while Aussie, Euro-Yen, Dollar-Yen and USDCNY could rise in the near term before facing resistances in the next 3-4 sessions. Rupee looks strong and could test crucial support over the next couple of sessions.

Dollar Index (96.28) and Euro (1.1362) are stable at levels seen yesterday. Euro could be limited to a fall towards 1.1325 in the near term before re-attempting to test 1.1380-1.1400 again. Dollar Index, on the other hand is holding above support at 95.50 and could trade within 95.50-96.50 for sometime before breaking sharply on either side. Over the next 2-sessions this week, both Euro and Dollar Index are likely to remain stable.

Dollar-Yen (107.97) has risen sharply over the last 2-sessions and could test immediate resistance near 108 as seen on the daily candles. While 108 holds, another fall towards 107.0-106.50 could be possible in the near term.

Euro-Yen (122.67) has risen above our expected resistance near 122.50 and while the pair trades higher, it could rise towards 124 in the near term. View is bullish for Euro-Yen.

Aussie (0.6995) has also moved up to test our mentioned level near 0.70. There is scope for rise towards 0.7050 in the near term from where a rejection looks likely. Immediate view is bullish.

Pound (1.2683) is stable and could trade within 1.26-1.28 for sometime before breaking on either side. A fall towards 1.26 looks likely in the next 2-3 sessions.

USDCNY (6.8748) is falling before the US-China meet due this week. While above 6.83/85, there could be scope of rising towards 6.90. A break below 6.80 is necessary to turn the sentiments bearish for USDCNY.

USDINR (69.16) closed below 69.20 yesterday opening up chances of testing 69.00-68.90 on the downside; thus negating chances of rising towards our expected 69.75. It would be important to keep a close watch on the price action near 69 as that could trigger further directional movement for the medium term. A break below 69, if seen could turn the sentiment towards a stronger Rupee for the medium term.

INTEREST RATES

The US Treasury Yields have bounced yesterday across tenors as the increased hopes for a rate cut in July seems to be fading out. Following Powell's comments on Tuesday that the central bank will wait and watch, James Bullard - the only member to vote for a rate cut in the June meeting, said yesterday that a 50bps cut will be overdone at the moment and a 25bps cut would be enough. This dashed the hopes in the market that the Fed may not go in a hurry to cut rates aggressively.

As a result, the US 30Yr (2.56%), 10Yr (2.05%), 5Yr (1.81%) and 2Yr (1.78%) Treasury Yields bounced yesterday. The bounce yesterday could delay our preferred fall in the yields. The 30Yr can consolidate between 2.53% and 2.60% before it tests 2.50% and 2.48% on the downside. The 10Yr is getting good support at 2%. A break above 2.10% can trigger a corrective rally to 2.15% and 2.20% in the coming weeks.

The German 2Yr (-0.74%) was stable yesterday while the 5Yr (-0.64%), 10Yr (-0.30%) and 30Yr (0.27%) were up slightly. However, the broader trajectory remains down and the yields are likely to come down in the coming days. The 30Yr can inch lower to 0.2% and the 10Yr can test -0.4% in the coming weeks.

As expected, the 10Yr GOI (7.0647%) has risen yesterday to test 7.05%. It has room to test 7.10%, but a rise beyond it is less likely. The 10Yr GOI can reverse lower again to 7.0% and 6.90% after testing 7.10%. As we have been mentioning, the 10Yr GOI can consolidate sideways between 6.90% and 7.10% before resuming its downtrend towards 6.80%-6.75%.

Key Highlights

• The Aussie Dollar started a strong recovery from the 0.6830 support against the US Dollar.
• AUD/USD broke the 0.6900 resistance and a bearish trend line on the 4-hours chart.
• The US Durable Goods Orders declined 1.3% in May 2019, more than the -0.1% forecast.
• The US Gross Domestic Product in Q1 2019 could grow 3.1%.

AUDUSD Technical Analysis

After trading as low as 0.6831, the Aussie Dollar started a strong recovery against the US Dollar. The AUD/USD pair broke the key 0.6900 resistance level to move into a bullish zone.

Looking at the 4-hours chart, the pair climbed steadily above the 0.6920 resistance, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

Moreover, there was a break above a bearish trend line at 0.6930 on the same chart. Finally, the pair broke the 0.6960 resistance and the 61.8% Fib retracement level of the downward move from the 0.7022 high to 0.6831 low.

The pair is showing positive signs and it could continue to rise above the 76.4% Fib retracement level of the downward move from the 0.7022 high to 0.6831 low.

However, there is a strong resistance waiting on the upside near the 0.7000 and 0.7015 levels. If there is an upside break above the 0.7022 high, the pair could rally towards the 0.7050 and 0.7060 levels.

If AUD/USD struggles near 0.7015, there could be a short term downside correction below the 0.6960 support level in the near term.

Fundamentally, the US Durable Goods Orders report for May 2019 was released by the US Census Bureau. The market was looking for a minor decline of 0.1% in orders in May 2019.

The actual result was well below the market forecast, as there was a 1.3% decline in the US Durable Goods Orders. Looking at the Nondefense Capital Goods Orders Excluding Aircraft, there was a 0.4% rise, whereas the market was only looking for 0.1%.

Overall, EUR/USD, GBP/USD, and AUD/USD remain well supported, but also facing many hurdles on the upside.

Economic Releases to Watch Today

• Euro Zone Economic Sentiment Indicator June 2019 – Forecast 104.6, versus 105.1 previous.
• German Consumer Price Index for June 2019 (YoY) (Prelim) – Forecast +1.4%, versus +1.4% previous.
• US Initial Jobless Claims – Forecast 220K, versus 216K previous.
• US Gross Domestic Product Q1 2019 – Forecast 3.1%, versus previous 3.1%.

The Canadian dollar is higher against the US dollar on Wednesday. The loonie rose slightly 0.38 percent versus the greenback with the price of oil also rising more than 2 percent. The gold rally hit a speed bump with the yellow metal losing 0.41 percent as investors take profit on the current run and appetite for safe havens subsides.

The Canadian currency traded h higher as Treasury Secretary stoked trade optimism by saying the deal is 90 percent done. There is still little details on what that actually means, and last time the market heard similar claims it was before a falling out that lead to tariff escalation from the US and China. Even if there is no major deal announcement the worst case scenarios are benign with a new round of talks the most likely outcome of the meeting as a sidebar of both leaders attending the G20 in Japan.

The Fed walked back market expectations of a 50 basis points cut with major dove Fed president Bullard suggesting a 25 basis points reduction would be more appropriate. The fact remains that the Fed could cut in the short term and that is boosting the loonie versus the greenback as economic data in Canada validate the Bank of Canada (BoC) staying on the sidelines by holding the benchmark rate at 1.75 percent and not follow other major central banks down the easing path just now.

OIL – Crude Higher After Monster Drawdown

Oil prices rose on Wednesday after the release of the Energy Information Administration (EIA) weekly inventories report. The higher than expected drawdown boosted crude prices with West Texas Intermediate rose 2.4 percent and Brent 1.89 percent.

Stronger demand in the US cause a 12.8 million drop in inventories destroying the 2.5 million forecast. US production has been rising, but at the moment the OPEC+ cut agreement, US Philadelphia Energy Solutions shutdown and geopolitical situations leading to sanctions against Iran and Venezuela are keeping supply levels low.

Supply disruptions have added price stability, in particular the production cut agreement by the OPEC+, but as doubts rise on what the fate of the G20 meetings will have on global growth and energy demand, the deal could not get an extension. It makes sense for major producers, Russia being the most vocal, to delay their decision until they get a sense which way the US-China trade war will unfold.

Supply disruptions and lower inventories would push crude prices higher as Middle East tensions remain high, and with trade optimism at a level where at least trade relations could not get worse after a Trump-Xi meeting.

GOLD – Gold Rally Stops as Investors Take Profit Eye G20

Gold dropped 0.42 percent but given the strong safe haven rally, the yellow metal is still trading above $1,409.42

Middle Eastern tensions will continue to remain high as Iran and the US do not seem ready to back down and have in fact escalated their verbal attacks. The G20 is looking to be a disappointment to investors looking for a blockbuster trade deal to be announced and is now expected to yield a new round of talks between the US and China to be held later this year.

The gold suffered another setback, as two prominent Fed members, Chair Powell and FOMC voting member and known dove Bullard were less dovish than a week ago on Tuesday. A 50-basis point rate cut is off the table as per Bullard next meeting but the sense that there is no urgency from the Fed was not lost on the market.

US President Trump was back on the offensive against the Fed, and he called the current monetary policy “insane”. Trump was disappointed that the Fed did not cut rates in its June Federal Open Market Committee (FOMC) meeting.

Even though the Fed has hinted at an upcoming rate cut, the comments of 50 basis points being too much, could end up with the central bank holding rates steady if economic indicators rebound in the short term. Today’s data was mixed with core durable goods beating the forecast, but the headline of new purchases by manufacturers going into negative territory for a second month in a row and with a downward revision to the previous data point.

STOCKS – Equities mixed on Less Dovish Fed and G20 Uncertainty

Equities continued to lose momentum on Wednesday as Middle Eastern tensions, trade anxiety and a less dovish Fed did not combine to reassure investors. The Trump administration is trying to downplay expectations of a significant outcome of the upcoming meeting between Presidents Trump and Xi in Japan. The two leaders will meet at a sidebar of their G20 commitments and given the huge distance in their negotiating positions there is now little probability of a major announcement on trade.

The Fed chair and the most prominent dove in the FOMC were less dovish than two weeks ago. Chair Powell stressed the negative impact trade disputes have on economic growth, but he continues to be hawkish on the American economy despite the latest indicators showing some softness. Powell remarked that even the tariffs have not put a lot of pressure, the Fed’s chief main job at the moment is to manage the expectations of the market.

The G20 meeting is likely not to produce an agreement despite positive comments by US Treasury Secretary Mnuchin, but at least the two nations are back on the table, Powell could feel secure in calling current headwinds temporary awaiting a rebound of economic indicators such as GDP and the expected jobs rebound in the first week of July.

CRYPTO – Bitcoin Gets Safe Haven and Libra Boost

Bitcoin prices hit an 18-month high at it smashed the $13,000 price level and is trading at $13,619 on the back of Facebook’s entry into the crypto world. The introduction of Libra is validating the claim of bitcoin as an alternative asset class, especially with current market conditions when investors seek to diversify to hedge against uncertainty.

The new easing monetary policy cycle is another factor contributing to the rise of bitcoin as appetite for higher yields could drive investors away from more traditional asset classes and into the crypto world.

The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products (ex. SPR) stocks decreased -11.89 mmb to 1304.89 mmb in the week ended June 21. Crude oil inventory slumped -12.79 mmb to 469.58 mmb (consensus: -2.54 mmb). Inventories rose in ALL 5 PADDs. Stockpile in PADD3 (Gulf Coast) alone sank -6.26 mmb during the week. Cushing stock dropped -1.75 mmb to 51.84 mmb. Utilization rate climbed +0.3% to 94.2% while crude production slipped -0.1M bpd to 12.1M bpd for the week. Crude oil imports dropped -0.81M bpd to 6.66M bpd in the week. The front-month WTI crude oil price rallied to the highest level in a month before pulling back.

Concerning refined oil product inventories, gasoline inventory declined -1 mmb to 232.23 mmb although demand sank -4.65% to 9.47M bpd. The market had anticipated a +0.29 mmb increase in stockpile. Production rose +1.52% to 10.41 bpd while imports dropped -2.51% to 0.82M bpd during the week. Distillate inventory plunged -2.44 mmb, to 125.38 mmb. Demand dropped -2.29% to 3.97M bpd. The market had anticipated a +0.52 mmb gain in inventory. Production slipped -1.23% to 5.31M bpd while imports slumped -80% to 0.03M bpd during the week.Released after market close on Thursday, the industry- sponsored API estimated that crude oil inventory slumped -7.5 mmb during the week. For refined oil products, gasoline stockpile fell -3.2 mmb while distillate  added +0.16 mmb.

[php_everywhere instance="1"]