Crude Oil Prices Hold Lofty Levels as US Dollar Softens on Rising Inflation and Yields. Where to for WTI?
Crude Oil, US Dollar, AUD/USD, AU CPI, RBA China - Talking Points
- Crude oil prices find support with USD softening on higher yields
- APAC equities went lower as inflation becomes less transitory
- Energy demand growing, oil is an easy substitute.Can oil break higher?
Crude oil is holding the high ground for now after an industry report showed US stockpiles dwindling. S&P 500 made another record high in the US session, but equities were softer in Asia today. Increasing US/China geopolitical tensions and rising yields after higher than expected core Australian CPI data undermined stocks.
Crude oil was steady today after a report from the industry funded American Petroleum Institute showed a significant decline in stockpiles at the Cushing, Oklahoma storage hub.
If true, it would go a long way to explaining the calendar spread between the front contracts and those further out. Traders are paying a premium for oil available now. The market awaits the EIA/DOE report tonight for clarification of inventory levels.
West Texas Intermediate crude is currently US$ 84.08 barrel as this goes to print. Discussion between Iran and the EU today may impact oil prices.
The Federal Communication Commission (FCC) banned China Telecom Americas from operating in the US, citing national security grounds. The Chinese state-owned telco was warned in 2020 that this may happen, along with China Unicom Americas and ComNet (USA).
Billionaire and founder of Evergrande group Hui Ka Yan, was urged to use his personal wealth to assist with the company’s debt problems by the Chinese authorities.
US tech stock earnings were mixed overnight but Deutsche Bank reported a solid beat today.
The Australian Dollar and G-10 yields rose immediately after the Australian CPI numbers today.
Australian third quarter headline inflation came in at 0.8% q/q against expectations of 0.8%. The annual headline rate came in 3.0% y/y versus 3.1% forecasted. The RBA’s preferred measure of trimmed mean printed at 0.7% q/q instead 0.5% anticipated, which made the annual read 2.1% y/y against 1.8% expected.
Australian government 3-year bond yield traded above 1% for the first time since the pandemic began. The RBA currently operate yield curve control (YCC) by targeting the April 2024 Australian government bond to be at 0.10%. Last week they stepped in and bought AUD 1 billion in an attempt to get the yield down to their target. Today it traded back to levels before their intervention, above 0.2%.
Looking ahead, the UK budget will be delivered, US durable goods data is due out and then the Bank of Canada rate decision. The market is not expecting a change in rates but await a possible further withdrawal of the amount of stimulatory asset purchasers each week.
Crude Oil Technical Analysis
Crude oil remains within an ascending trend channel as it made a 7-year high on Monday.
Resistance could be at that recent high of 85.41. On the downside, there might resistance at previous lows of 80.78, 79.42, 74.96 and a pivot point of 73.14.
--- Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.