Crude Oil, US Dollar, OPEC+, China PMI, WTI, Brent, USD/JPY, Wheat – Talking Points
- Crude oil wilted after US Dollar resumed strengthening on higher yields
- Growth woes re-emerged after a miss on Chinese PMI for October
- The RBA, the Fed and BoE will meet this week. Will a change in rates hit WTI?
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Crude oil dipped lower on Monday on a stronger US Dollar and after Chinese PMI revealed a pessimistic outlook for business conditions going forward.
OPEC+ production cuts are due to start this week and although black gold is lower today, it is on track for it’s first monthly gain since May.
The backdrop for the oil price remains fraught with uncertainty. Supply constraints from the Ukraine war, political tension between the US and Saudi Arabia, price caps and potential for further production cuts from OPEC+ are all lingering.
The WTI futures contract is under US$ 87.50 bbl while the Brent contract is approaching US$ 95 bbl.
The global growth outlook was also undermined by Chinese PMI numbers today. The manufacturing managers index was 49.2 for October against 49.8 anticipated. The non-manufacturing index read was 48.7 for the same month, significantly lower than the 50.1 forecast.
China’s CSI 300 was slightly down on the day while most other APAC equity indices were higher after a solid lift for Wall Street on Friday.
Japanese industrial production was -1.6% against -0.8% expected month-on-month for September and 9.8% year-on-year to the end of September, below forecasts of 10.5%.
Month-on-month retail sales in Japan for September showed a 1.1% increase rather than 0.8% anticipated to reveal a 4.5% increase instead of the 4.1% forecast. USD/JPY traded above 148 earlier in the day.
Treasury yields have added a couple of basis points across the curve in Asia after notable gains on Friday, underpinning the US Dollar.
Gold is also under pressure on the stronger dollar and is heading for its seventh successive monthly loss, trading under US$ 1,650 an ounce.
Wheat futures have soared on the news that Russia will break the agreement to allow Ukrainian exports of the crop to nations in need of the vital food stock. They have blamed drone strikes on their naval fleet emanating from Ukraine.
Australian retail sales came in hotter than anticipated at 0.6% month-on-month for September instead of 0.5% forecast.
The beat comes ahead of tomorrow’s RBA monetary policy meeting. The market has priced in a 25 bp hike on the back of a blistering 7.3% year-on-year headline CPI to the end of the third quarter.
The Aussie and Kiwi Dollars are the outperforming currencies through the Asian session.
The Federal Reserve and the Bank of England will meet on Wednesday and Thursday respectively and will also be delivering a verdict on their monetary policy settings. Both of those central banks are anticipated to hike by 75 bp each.
After UK mortgage approval data today, Euro zone CPI and GDP will be the focus for Monday’s trading.
The full economic calendar can be viewed here.
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WTI TECHNICAL ANALYSIS
There is a potential Bearish Pennant Formation emerging and a break below the lower trendline may confirm the pattern.
Support could be at the recent low of 81.30, which lies just above potential or a break point support at 81.20.
Resistance might be at the break points of 90.39 and 90.56 ahead of the peak of 93.64. The latter currently also lines up with the 100-day simple moving average (SMA) which may add to resistance.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on Twitter