Oil Prices
Oil prices have slipped back into the red today as the support from last week’s price shock fades to the background as the prospects of a significant Middle East escalation looks highly unlikely.
And with traders struggling to make a convincing bullish argument it's back to the markets seemingly endless preoccupation with US-China trade and the outlook for global oil demand. Factor in the slightly downcast IEA estimates on oil demand growth and it does provide a more fact-based argument to trade off.
But I think it's far too early to put the considerable supply tail risk from last week’s tanker incident in the rear-view mirror as at minimum the risk of further supply disruption remains elevated and should provide a credible backstop for Brent and WTI. And while I continue to believe that demand risks are more than sufficiently priced into oil now, weak data out of China and omnipresent global growth concerns continue to weigh negatively on both oil and the broader industrial commodity markets thwarting any upside ambitions.
Indeed, a market in need of some positive economic news.
Gold Prices
Gold prices struggled for traction in Asia this morning as traders have been quick to sidestep and to put last week Middle East escalation in the rear-view mirror, as a significant military escalation remains unlikely.
Geopolitical risk in Hong Kong faded as the local government shelved the controversial extradition bill buttressing regional risk sentiment.
Ambitious US rate cut prognostications have pulled back in the wake of the robust USD retail sales print which has added to the US dollars appeal and effectively capped Gold prices today.
Indeed a strong signal for fast money and technical traders to test the bullish markets resolve which triggered some stops on weaker longs on the break of $1340 although long term strategic buyers should support the dips to $1325
Gold is getting a lot of attention, and I'm fielding a ton of question about when the next mini gold rush will get triggered.
This week’s FOMC will provide the clearest signal for gold price. A dovish outlook or a godsend via an unexpected rate cut will fuel the Bulls and pave the way for a fresh push higher gold, especially if the US economic data deteriorated. But I think after the stronger US retail sales data it does challenge this narrative
On a technical basis, the bid side looks empty to 1330, But I'm looking to engage longs are $1325. Look to engage/add to longs around $1325, but prudence does suggest keeping one's powder dry for the post FOMC, but I'm more convinced now than ever before that its global doves (PBOC, ECB and FOMC) to the rescue which should be the next major catalyst to push prices higher.
Currency Markets
The dollar remains bid as ECB member Coeure gave the nod towards further policy easing. I think the big question needs to be resolved which string or instead strings to pull. And while the eurozone economy looks flat out gloomy, but ECB Nowotny suggested the ECB will on cut rates in the event of a recession.
A tranquil start to the week for currency traders with most G-10 pairs trading in a tight range, predictably so with so much riding on this week’s FOMC. Although USD/JPY made a bit of charge into the Tokyo fix but has traded lower and flat since