Crude Oil Price Wobbles as Recession Risk Lowers Yields. Will WTI Resume Up Trend?

Crude Oil, WTI, Brent, Hang Seng, Treasuries, Metals, USD/JPY – Talking Points

• Crude oil prices were slightly softer to start the week
• APAC equities mostly had a good day while industrial metals sank
• Treasury yields are softening. Will crude oil make a new high?

Crude oil slipped through the Asian session today as recession fears weighed against inflation concerns.

Data from Baker Hughes, an energy technology company, showed one more oil rig was added to the end of last week in the US. Total rigs now stand at 595 versus 376 from a year ago.

JP Morgan have reported that in the worst-case scenario, crude could get as high US$ 380 bbl. The WTI futures contract is a bit below $US 108.50 bbl while the Brent contract is slightly above US$ 111.50 bbl.

APAC equities had a mostly positive day after Wall Street saw gains of around 1% for the main indices on Friday. Hong Kong’s Hang Seng Index (HSI) was the notable underperformer, down a bit over 0.5%.

Yet another large HSI listed property developer, Shimoa Group Holding Ltd, missed a foreign currency bond payment. This one was for USD 1 billion.

A widening of Covid cases in China helped to undermine sentiment, although the Australian Dollar steadied on Monday after tanking on Friday. The RBA will meet tomorrow, and the market is forecasting a 50 basis points (bps) hike to take the cash rate to 1.35%

Industrial metals continue to come under pressure with copper, iron ore and nickel all notably lower to start the week. Gold remains firm at around US$ 1,811 an ounce at the time of writing.

Developed market yields in Asia continued lower after Treasuries saw the entire curve move down. The belly of the curve saw the largest falls, with the 5-year slipping 16 bps to 2.88%. The Australian 10-year bond is trading 9 bps lower at 3.5%

The Bank of Japan is defiantly maintaining yield curve control despite continued attacks from speculators that are betting the bank will not be able to hold yields down if price pressures continue to grow. USD/JPY is trading just above 135.00, not far from the recent 24-year peak at 137.00.

After Swiss CPI data today, Canadian PMI figures will be released. The US are on their 4th July holiday.

The full economic calendar can be viewed here.

WTI Crude Oil Technical Analysis

WTI crude oil has moved back above the 100-day simple moving average (SMA) , which has a positive gradient, and this may suggest that bullish moment is evolving.

Previous highs at 15.05 and 123.68 might offer resistance, as well as the break point at 116.57. On the downside, support could be at the prior lows of 101.53. 98.20 and 95.28.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter