WTI continues to defy the consensus, AUD/USD falls post RBA: Asian Open

Market Summary:

The RBA hiked their cash rate by 25bp to 4.35% in line with the consensus view, although AUD/USD was quick to selloff as the statement lacked the apparent hawkish tone that markets were positioned for. Hot inflation, producer prices and retail spending had seen some banks upwardly revise their forecasts for a November and December hike, yet the minor tweak to the final paragraph suggests the RBA’s decision to hike once more remains on a meeting-by-meeting basis as data comes in.

AUD/USD was the weakest FX major during its worst day in over three weeks, AUD/JPY rolled over after just failing to retest its June high / YTD high and Australian yields were also off by at least 15 bps across the curve.

The US dollar was the strongest FX major and rose for a second day as it recouped some of Friday’s heavy losses, although the lack of momentum and lower US yields suggests its part of a retracement for USD
Fed member Bowman said he expected the Fed will have to tighten rates further whilst Logan said that inflation remains too high
Gold fell for a second day in line with yesterday’s bearish bias before finding support just above the September high. Given half of yesterday’s range was the low wick then gold may find some stability over the near-term.
Oil prices also continued to fall, with WTI falling over -4% on Tuesday and breaking beneath $80 in line with my bearish bias following soft Chia data and rising OPEC exports
Wall Street indices pushed higher which saw the Nasdaq 100 notch up its eight consecutive bullish day, whilst the S&P 500 and Dow Jones have now risen for seven

Events in focus (AEDT):

08:45 – New Zealand employment
11:30 – Australian building approvals
13:00 – New Zealand inflation expectations
16:00 – Japan coincident / leading index
18:00 – German CPI
21:00 -Eurozone retail sales
21:15 – Fed governor Cook speaks

ASX 200 at a glance:

The ASX 200 snapped a 5-day winning streak following the RBA’s decision to hike
Only 6 of its 11 sectors declined and the daily range was relatively small
And given the lack of bearish follow-through, the hike was seemingly priced in and ASX traders live in hope the terminal rate of the cycle is 4.35%
Whilst Wall Street provided a positive lead, SPI 200 futures were flat and it looks like the ASX 200 needs to decide again whether it has the strength to challenge key resistance around 7,000

WTI crude oil technical analysis (chart):

I’m happy to say I was one of the few calling for lower oil prices despite the consensus making +$100 calls. The clues included two suspiciously small ‘bullish’ weekly candles despite an influx of Middle East headlines whilst managed funds and large speculators were increasing their gross-short exposure. Alas, oil prices have since fallen to a 4-month low and show the potential to fall further.

WTI crude oil broke firmly beneath $80 bias before finding support around the $77.33 high, which now brings the $75 and $70 handles into focus for bears near the 100% and 138.2% Fibonacci projection levels. The fact that WTI closed on support at the low of the day suggests any initial pullback prior to a break may be on the small side.

AUD/USD technical analysis (chart):

Traders were positioned for a hawkish statement they seemingly weren’t given, although the interpretations of statements can vary widely from a central bank’s intent. Stil, AUD/USD reacted a I suspected it would under this scenario; it sold off and failed to break key resistance. It also fell to the 0.6430 area, near the high-volume node from the prior leg and came close to probing 0.64.

Given key support at 0.64 held, RSI (2) reached oversold and curled higher with prices, a small bounce could be due today. That leaves the potential for near-term bullish setups, or perhaps bears may want to wait on the sideline for evidence of a swing high to fade into around potential resistance levels.

View the full economic calendar

-- 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

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.