Key Points Regarding Crude Oil, China, and Global Economic Factors:
- Crude oil prices experienced a decline due to renewed strength in the US Dollar.
- The Federal Reserve’s signaling of its intentions has caused some market unease.
- Concerns arise about the impact on WTI if China struggles to revive its economy.
Crude oil prices saw a decrease on the previous day, retreating from the recent 10-month peak reached last week.
The energy commodity seems to be influenced by a combination of factors. This includes China’s economic challenges and the potential for a prolonged hawkish stance by the Federal Reserve, which is contributing to the strength of the US Dollar.
In contrast, liquefied natural gas (LNG) prices managed to gain momentum due to the possibility of labor disputes in Australia’s significant gas fields located in the northwest.
Despite the marginal softening of China’s new home prices in July, concerns grow over the potential for financial contagion stemming from property developers’ missed debt payments to impact other sectors.
Crude Oil, China, and Global Economic Factors
Global Economic Factors: Zhongrong International Trust Co., a significant player in China’s trust sector, has failed to meet obligations to its clients in recent weeks.
The People’s Bank of China set the Yuan’s reference rate at 7.1986, surprising the market with a notably stronger valuation. Reports indicate that State Banks have been instructed to purchase the Yuan.
Australian mining stocks face downward pressure due to fears that the ongoing economic slowdown in their primary customer, China, could negatively affect their exports.
The APAC trading session’s risk sentiment and outlook for growth-oriented assets were already dampened. It is following a decline in major indices during the previous North American session. Wall Street experienced a drop of over 1% across its key benchmarks.
This negative sentiment was fueled by robust US retail sales figures, which raised concerns about a more hawkish Federal Reserve stance compared to previous expectations.
Minneapolis Federal Reserve President Neel Kashkari’s remarks further reinforced these concerns. He questioned whether the Fed had taken sufficient measures to bring inflation down to the targeted 2% level.
Treasury yields are slightly lower as Wednesday’s trading begins, following a modest increase in basis points across the yield curve on the previous day. Spot gold’s value remains steady above the $1,900 mark.
The Reserve Bank of New Zealand
The Reserve Bank of New Zealand (RBNZ) has decided to keep its cash rate unchanged at 5.50%. However, the market interpreted the accompanying statement as having a hawkish tone, leading to a rally in the New Zealand Dollar (Kiwi).
GBP/USD remains stable near 1.2700 in anticipation of inflation data, while EUR/USD traders are monitoring Eurozone-wide GDP figures.
For a comprehensive economic calendar, refer here.
Technical Analysis Snapshot for WTI Crude Oil
The WTI futures contract recently broke below the lower boundary of an ascending trend channel. To learn more about breakout trading, click on the provided banner.
The current selloff appears to have paused around the 21-day simple moving average (SMA). This could serve as a potential support level. Further support levels may be found at the 260-, 200-, 100-, and 55-day SMAs at 79.11, 76.68, 75.06, and 74.90, respectively.
Additional support could emerge near recent lows of 79.90 and 78.69. In the event of further decline, support might be found around the 77.33 breakpoint and the prior low at 73.82.
On the upside, resistance levels could materialize around the 83.40 breakpoints, followed by the recent peak at 84.89.
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