WTI crude oil analysis: Asian Open – 8th July 2023

Market Summary:

• Fed member John Williams said in a pre-recorded interview on Monday that he thinks “we’re pretty close to what a peak rate would be” and that the debate for the upcoming meeting is really about whether they need another rate increase, or not.
• Given Fed fund futures have been pricing in a pause in September at least 80% or more for the last few weeks suggests this debate has already been settled
• Yet Fed Governor Michelle Bowman seems set to vote for another hike, saying in a separate interview that she expects “additional increases will likely be needed to lower inflation”
• The BOJ discussed the potential for sustained inflation, according to the Summary of Opinions from their last meeting. However, they are still not anywhere close to raising rates if their comment that “there is still a significantly long way to go before revising the negative interest rate policy” is to be believed
• Wall Street posted cautions gains, with the Nasdaq holding above the March 2022 high for a third consecutive session although weighed down by Apple (AAPL)
• Apple (AAPL) shares continued to slide following last week’s earnings report, currently down -6.3% over two sessions having broken out of its bullish channel

Events in focus (AEDT):

• 09:30 – Japan’s household spending, wages
• 09:50 – Japan’s current account, bank lending, retail sales
• 10:30 –Australia consumer sentiment (Westpac)
• 11:30 – Australian business confidence (NAB)
• 13:00 – China’s trade balance
• 16:00 – German CPI

Technically Speaking:

• Whilst prices initially dipped lower in the European session, USD/JPY went on to form a 2-bar bullish reversal pattern, which suggests upside potential today
• EUR/USD retraced and perfectly respected Thursday’s high and formed a prominent intraday swing low before closing above 1.10. The bias now remains bullish above yesterday’s low.
• Gold also retraced before finding support around Friday’s open price of 1932, and is now trying to build support around the 1935 volume cluster mentioned in yesterday’s Asian open report. Ideally looking for bullish momentum to return sooner than later to retain the near-term bullish bias for a run to 1950 – 1955.
• AUD/USD formed a small inside day and Doji formed on Monday, so we’re still waiting to see if bears will drive it lower for another leg towards 0.6500 or the YTD lows, or if bulls can break above 0.6600 and deem last week’s break of support as another fakeout.

ASX 200 at a glance:

• The ASX 200 formed a small bearish inside day on Monday, but it formed a slight higher low relative to last week’s low above 7290 support
• SPI futures and Wall Street point to a slightly higher open
• We favour a near-term technical bounce towards the 7350 – 7368 region whilst prices remain above last week’s low

WTI crude oil daily chart:

We noted in yesterday’s COT report that WTI had rallied into the YTD highs, which is a likely area to prompt a consolidation or retracement. Monday trade saw WTI hand back almost all of Friday’s gain and produce a 2-bar reversal pattern (dark cloud cover). And with that comes the potential for a deeper pullback, so long as prices remain beneath yesterday’s high. Volumes were also lower which shows a lack of enthusiasm to drive the market high, but it also means bears are no steeping into the market in droves.

WTI crude oil 1-hour chart:

The 1-hour chart shows support was found at the weekly pivot point, and prices have reverted to the January high. We suspect this could be a pivotal level for today’s session and may prompt a pullback early on, given RSI (2) reached overbought. The question now is whether we’ll see bears step up their game, but we’d also need to see USD strength. A break beneath yesterday’s lows confirms the daily 2-bar reversal and opens up a run towards the lower trendline or 80 level. 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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