Oil eyeing 2015 Q3 highs, USD-index in 5-week lows
EU markets closed in positive on back of solid GDP figures and decent figures from the China Foreign Reserves. US markets were more or less in neutral with a slight positive bias with energy and telcom leading the markets higher. S&P took home gains for the second day in a row and has closed above trend resistance projected from the all-time highs printed in May 2015. In FX markets, the US dollar index (DXY) fell overnight to five-week lows on back of the recent data from the US reducing the likelihood for a US rate hike over the summer. EURUSD posted its second doji-formation, hovering around the 50% fibo retracement in the May wave with a bias towards the upside. In Asia, the Japanese economy posted a strong GDP, which assisted JPY-pairs in trading higher.
With the weaker US dollar coupled with supply squeezes, WTI oil closed above $50/barrel for the first time in 2016 and is now eyeing the highs from October 2015 at 50.92. In precious metals, gold spot is back above $1250/oz.
WTI Crude Daily
This morning, we’ve seen the Swiss CPI coming out a tad lower than expected for May, but no real reaction in the market. CHF is still appreciating despite the SNB’s efforts to keep the currency stable and competitive.
At 1030CET, UK Industrial Production for April is expected MoM/YoY at 0.0%/-1.5% from 0.3%/-1.9% in March. The UK economy has been going downwards on back of uncertainty with regards to the BREXIT and we think that the Industrial Production will reflect this as well. GBPUSD has been bid for four days in a row despite polls showing that the “leave” side has a slight advantage. On daily, the pair is in a wedge, meaning that something has to give. We would remain cautions with GBP-trades ahead of the referendum on June 23rd and would go with smaller position sizes due to the lack of liquidity and spiky volatility.
In the afternoon, we do not have anything interesting from the US, but Canada will release Housing Starts and Building Permits for May and April, respectively. USDCAD has recently traded lower on back of the weak US data and oil prices pushing higher. With the price again below the 50-day SMA and taking out May lows, we could see an extended move towards a re-test of the 2016 lows (see our Weekly publication as our Orderbook level was hit in USDCAD with both targets as well).
Energy inventories will also be interesting at 1630CET, where the Crude Inventories is expected to show another draw of -2.740M from -1.366M last week. Should the figure come out worse than expected, oil prices could take another move higher.
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