WTI Crude Oil Analysis: The Debt ceiling bill makes it to Biden’s desk

Asian Indices:

Australia's ASX 200 index rose by 30.4 points (0.43%) and currently trades at 7,141.20
Japan's Nikkei 225 index has risen by 323.53 points (1.04%) and currently trades at 31,471.54
Hong Kong's Hang Seng index has risen by 666.31 points (3.66%) and currently trades at 18,883.22
China's A50 Index has risen by 182.24 points (1.47%) and currently trades at 12,567.57

UK and Europe:

UK's FTSE 100 futures are currently up 16 points (0.21%), the cash market is currently estimated to open at 7,506.27
Euro STOXX 50 futures are currently up 20 points (0.47%), the cash market is currently estimated to open at 4,277.61
Germany's DAX futures are currently up 75 points (0.47%), the cash market is currently estimated to open at 15,928.66

US Futures:

DJI futures are currently up 56 points (0.17%)
S&P 500 futures are currently up 8 points (0.19%)
Nasdaq 100 futures are currently up 36.25 points (0.25%)

Congress clearly want to chill this weekend

It appears that US congress actually want to enjoy this weekend, having managed to get the debt-ceiling bill passed through the House and Senate and onto Joe Biden’s desk for his signoff - with a full business day remaining.

He’s expected to sign it into law and address the nation from the Whitehouse at 19:00 EST, where I suspect we’ll hear nothing but the benefits of raising the nation’s credit card limit, despite no way (or intention) of paying it back. Still, the can has been kicked down the road once more, and that is good enough for now.

It is debatable as to how much of an impact this could have on sentiment given this outcome may mostly be priced in already. But it could at least support sentiment as we head into the weekend, where a soft NFP report could bolster bet on Wall Street and further justify a Fed pause in two weeks.

The Australian dollar was the strongest currency major overnight after the industrial relations empire raised the minimum wage by 5.75%, a move which has sparked fresh bets the RBA could hike their cash rate next week
Fed members Harker and Jefferson are seemingly on the same page regarding another Fed pause in two weeks time, which has seen expectations for a hike drop back below 25% after rising to over 70% earlier this week
Asian equities posted strong gains overnight on debt-ceiling relief and a less-hawkish Fed
China’s equity markets led the gains with the Hang Seng Enterprise both rising over 4% (Hang Seng is up ~3.6%)
Gold is trying to notch up its fourth bullish day, although for now it seems hesitant to break above the 1985.27 high
A bullish engulfing day formed on WTI yesterday with improved appetite for risk, and remained above $70 overnight

Nonfarm payroll is the main calendar event as we head into the weekend. Preliminary data which traders use to gauge sentiment for NFP has been a little mixed this week. The employment component to the ISM manufacturing index expanded, although not at a rate to offset the 7-month contraction of PMI and falling new orders index. APD employment was firm at 278k and above expectations, which favours stronger job growth in today’s NFP figures.

But with Fed members now seemingly on side with a June pause, it could take a particularly strong data set to jolt markets into repricing a June hike. And that could therefore limit USD upside if data comes in around expectations, but leave the US dollar particularly sensitive to the downside if it disappoints.

WTI crude oil 1-hour chart:

WTI fell over 8% on Tuesday or Wednesday, it has done quite an impressive job of recouping much of those losses since. There are two clear volume spikes which coincided with elongated bullish candles, which is why we favour a change of trend in favour of the bull camp. The debt ceiling deal also helps with this bias, over the near-term at least.

Prices are holding above the daily pivot point and respected $70 as support overnight, and we’d consider bullish setups with any pullback towards that zone to potentially target the daily R1 pivot / bearish trendline, a break above which brings $73 into focus near the daily R2 pivot and upper historical volatility band.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.