WTI Crude Oil Analysis: The Debt ceiling bill makes it to Biden’s desk

Asian Indices:

• Australia's ASX 200 index rose by 30.4 points (0.43%) and currently trades at 7,141.20
• Japan's Nikkei 225 index has risen by 323.53 points (1.04%) and currently trades at 31,471.54
• Hong Kong's Hang Seng index has risen by 666.31 points (3.66%) and currently trades at 18,883.22
• China's A50 Index has risen by 182.24 points (1.47%) and currently trades at 12,567.57

UK and Europe:

• UK's FTSE 100 futures are currently up 16 points (0.21%), the cash market is currently estimated to open at 7,506.27
• Euro STOXX 50 futures are currently up 20 points (0.47%), the cash market is currently estimated to open at 4,277.61
• Germany's DAX futures are currently up 75 points (0.47%), the cash market is currently estimated to open at 15,928.66

US Futures:

• DJI futures are currently up 56 points (0.17%)
• S&P 500 futures are currently up 8 points (0.19%)
• Nasdaq 100 futures are currently up 36.25 points (0.25%)

Congress clearly want to chill this weekend

It appears that US congress actually want to enjoy this weekend, having managed to get the debt-ceiling bill passed through the House and Senate and onto Joe Biden’s desk for his signoff - with a full business day remaining.

He’s expected to sign it into law and address the nation from the Whitehouse at 19:00 EST, where I suspect we’ll hear nothing but the benefits of raising the nation’s credit card limit, despite no way (or intention) of paying it back. Still, the can has been kicked down the road once more, and that is good enough for now. 

It is debatable as to how much of an impact this could have on sentiment given this outcome may mostly be priced in already. But it could at least support sentiment as we head into the weekend, where a soft NFP report could bolster bet on Wall Street and further justify a Fed pause in two weeks.

• The Australian dollar was the strongest currency major overnight after the industrial relations empire raised the minimum wage by 5.75%, a move which has sparked fresh bets the RBA could hike their cash rate next week
• Fed members Harker and Jefferson are seemingly on the same page regarding another Fed pause in two weeks time, which has seen expectations for a hike drop back below 25% after rising to over 70% earlier this week
• Asian equities posted strong gains overnight on debt-ceiling relief and a less-hawkish Fed
• China’s equity markets led the gains with the Hang Seng Enterprise both rising over 4% (Hang Seng is up ~3.6%)
• Gold is trying to notch up its fourth bullish day, although for now it seems hesitant to break above the 1985.27 high
• A bullish engulfing day formed on WTI yesterday with improved appetite for risk, and remained above $70 overnight

Nonfarm payroll is the main calendar event as we head into the weekend. Preliminary data which traders use to gauge sentiment for NFP has been a little mixed this week. The employment component to the ISM manufacturing index expanded, although not at a rate to offset the 7-month contraction of PMI and falling new orders index. APD employment was firm at 278k and above expectations, which favours stronger job growth in today’s NFP figures.

But with Fed members now seemingly on side with a June pause, it could take a particularly strong data set to jolt markets into repricing a June hike. And that could therefore limit USD upside if data comes in around expectations, but leave the US dollar particularly sensitive to the downside if it disappoints.

WTI crude oil 1-hour chart:

WTI fell over 8% on Tuesday or Wednesday, it has done quite an impressive job of recouping much of those losses since. There are two clear volume spikes which coincided with elongated bullish candles, which is why we favour a change of trend in favour of the bull camp. The debt ceiling deal also helps with this bias, over the near-term at least.

Prices are holding above the daily pivot point and respected $70 as support overnight, and we’d consider bullish setups with any pullback towards that zone to potentially target the daily R1 pivot / bearish trendline, a break above which brings $73 into focus near the daily R2 pivot and upper historical volatility band.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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