WTI crude oil mean reversion kicks in, ASX for 7100? Asian Open

Market Summary:

The British pound was the strongest forex major on Monday after hawkish comments from the BOE and a surprise move from the British PM, Rishi Sunak
David Cameron, the former UK PM who rolled the dice with the promise of a Brexit referendum if voted into power, is back in in government as foreign minister. The move by PM Sunak is seen as a requirement for a more centrist, experienced politician.
BOE chief economist Huw Bill said inflation remains too high and warned that there was no sign of a turn in domestically-driven services inflation. However, he also said that the BOE do not need to deliver another rate hike but to remain restrictive (which means higher rates for longer)
US 1-year inflation expectations softened to 3.6% from 3.7% prior, according to the New York Fed survey, with the 3-year remaining stable at 3% and the 5-year down to 2.7%
Whilst two Fed members were scheduled to speak, neither commented on monetary policy ahead of today’s key US inflation report
RBA’s assistant governor Marion Kohler warned that inflation may take longer to return to target than originally thought, as strong demand has allowed businesses to pass on cost increases. There’s also a concern that higher inflation will lead to higher inflation expectations.
USD/JPY reached a 1-year high on Monday in Asian trade before dropping over 70-pips in the US session. Whilst the initial reaction may have been to point the finger at the BOJ, in all likelihood it would have moved far more than 70 pips and this could simply be an options play
WTI crude oil rose for a second day after the OPEC monthly oil market report said that fundamentals remained strong and blamed speculators for the recent fall in prices

Events in focus (AEDT):

08:45 – New Zealand food price index
10:30 – Australian consumer confidence (Westpac)
11:30 – Australian business confidence (NAB)
18:00 – UK earnings, employment data
18:45 – SNB chairman Jordan speaks
19:00 – Spanish CPI, ECB Lane speaks,
19:45 – ECB’s Enria speaks
20:00 – IEA monthly report
21:00 – Eurozone GDP, employment, ZEW economic sentiment, German ZEW economic sentiment
21:30 – Fed Jefferson speaks
00:30 – US inflation

ASX 200 at a glance:

The ASX 200 cash index fell for a second day on Monday, with 10 of its 11 sectors also trading lower
Energy stocks led the way lower, although a recovery in oil prices overnight could help support the sector today
Gains from Wall Street and SPI 200 futures overnight point to an open back above 7,000 for the cash index today
Our chart below shows a bullish engulfing day formed after a false break of the 6946.5 low
Today I’m looking for evidence of a swing low on the intraday charts around the 7,000 area or 6980 to seek longs
Next upside target area for the index could be the 7076 – 7100 zone

WTI crude oil technical analysis (daily chart):

I’m glad to say that my contrarian short bias against oil worked out quite well, having broken below $80 and reached $75 by the 100% projection ratio. However, mean reversion is now underway following its extended move beneath the lower Keltner band and has rallied for the second day in the row. A move back to $80 seems quite likely, given the depth of the prior move lower.

The big question now is whether WTI crude oil will leave evidence of a swing high around the $80 handle (for a potential swig trade short) or retrace higher still. Take note that the Jan / April highs sit around a high-volume node (HVN), which can act as a magnet for prices. And as volumes were relatively low beneath $80, perhaps the deeper retracement towards $83 is on the cards for bulls to consider targeting (and bears wait to fade into).

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.