Crude Oil, US Dollar, Debt Ceiling, TOPIX, ASX 200, Federal Reserve – Topics
- Crude oil prices were somewhat supported by the prospect of a solution to the US debt ceiling.
- The Fed reminded markets that the path of future interest rates is a matter of conjecture.
- Will WTI rally if sentiment is fueled by the removal of debt uncertainty?
Crude oil prices posted modest gains early on Tuesday after talks between President Joe Biden and House Speaker Kevin McCarthy appeared to show positive developments.
After the North American close, both parties said that a default was not expected. McCarthy added that the discussion had been “productive in the areas where they disagree”.
Wall Street futures point to a positive start to the cash session, following a mixed Monday in which the Nasdaq rose 0.50% while the Dow Jones Index fell 0.42%. It seems that the big tech stocks in the Nasdaq remain in favor.
APAC stocks are mostly down, although Australia’s ASX 200 showed some signs of life. Japan’s TOPIX index hit a new 33-year high before falling back.
FX markets have had a quiet Tuesday so far and appear to be in a holding pattern until the US debt situation is resolved.
Once this is resolved, attention may turn back to the US Federal Reserve and interest rate developments. Throughout the evening, several Fed speakers expressed slightly different views on the direction of policy.
The most aggressive remarks came from Neel Kashkari, president of the Minneapolis Fed, Mary Daly, president of the San Francisco Fed, and James Bullard, president of the St. Louis Fed.
The less aggressive remarks, suggesting a pause in rate hikes, came from Raphael Bostic, President of the Atlanta Federal Reserve, while Tom Barkin, President of the Richmond Fed, declined to prejudge the next decision of the Federal Open Market Committee (FOMC).
JP Morgan CEO Jamie Dimon also warned that interest rates could rise to 6 or 7%. He had made similar comments in February. The Fed Funds target rate is currently 5.0-5.25%, and the next meeting is in mid-June.
Gold is hovering around $1,960 an ounce, and silver has also weakened to around $23.56 an ounce.
WTI futures are above $72 per barrel, while Brent is slightly above $76 per barrel. Wildfires in Canada continue to affect production there.
Weekly data from the US Energy Information Administration (EIA) will be released on Wednesday and will be closely watched after last week’s surprise rise in oil inventories.
European and North American purchasing managers’ indices will be released today, and Bank of England Governor Andrew Bailey will give a speech on monetary policy.
WTI CRUDE OIL TECHNICAL ANALYSIS
WTI failed to overcome resistance at 73.93 last Friday when it reached a high of 73.58 and this level could continue to offer resistance.
The 34-day and 100-day simple moving average (SMA) is just above these levels and could offer resistance.
On the downside, support could be at the breakout points and previous lows of 69.41, 66.82, 66.12, 64.36, 63.64 and 62.43.