Market Brief
Crude oil prices got a boost following the surprise OPEC deal. The West Texas Intermediate surged 10.50% yesterday and is testing the $50 threshold again. Across the Atlantic, the Brent crude moved similarly and rose 12%, crossing the $50 level to reach $52.70. The cartel has agreed to cut daily production by 1.2 million to 32.5 million barrels with the Gulf countries (Saudi Arabia, Kuwait, UAE and Qatar) and Iraq taking most of the cut, while Iran managed a better deal. Financial markets welcomed the news by lifting crude oil prices; however we would rather wait to see how OPEC members will actually respect the deal and implement the cut before turning bullish on oil.
The US dollar came under pressure on Thursday as it lost ground against the G10 currencies. The dollar index was off 0.23%, down to 101.27 as the euro, the Japanese yen and pound sterling were up roughly 0.30%. On the medium-term, EUR/USD is still trading range-bound between 1.05 and 1.06 as investors await next week’s ECB meeting when Mario Draghi should announce adjustments to the institution’s quantitative easing programme.
USD/JPY tested a key support during the Asian session as it rose to 114.83, the highest level since February this year. However, the pair has been unable to break this resistance to the upside and has eased back towards the 114 level. On the data front, Japanese companies reduced capital spending in the September quarter due to a contraction in capital expenditure of 1.3%y/y. This was the result of the yen remaining at elevated levels throughout the summer months. However, should the recent yen weakness persist, Japanese companies may adjust their spending to take advantage of this environment, which is conducive for exports.
Asian regional equity markets extended gains on Thursday with the Nikkei surging 1.12%, while the broader Topix index was up 0.94%. In mainland China, the Shanghai and Shenzhen Composites were up 0.72% and 0.62% respectively. Offshore, Hong Kong’s Hang Seng surged 0.32%, while in Taiwan, the Taiex was up 0.25%. Finally, European futures did not follow Asia's lead with most blinking red across the screen.
Today traders will be watching manufacturing PMI from Norway, Italy, Switzerland, France, Germany Spain, South Africa, the eurozone, the UK, Brazil and the US; ISM manufacturing, construction spending and initial jobless claims from the US.
Currency Tech
EUR/USD
R 2: 1.1259
R 1: 1.0954
CURRENT: 1.0617
S 1: 1.0521
S 2: 1.0458
GBP/USD
R 2: 1.2857
R 1: 1.2674
CURRENT: 1.2542
S 1: 1.2302
S 2: 1.2083
USD/JPY
R 2: 121.69
R 1: 114.87
CURRENT: 114.15
S 1: 109.80
S 2: 108.56
USD/CHF
R 2: 1.0328
R 1: 1.0257
CURRENT: 1.0151
S 1: 0.9929
S 2: 0.9550