British Brexit Secretary Dominic Raab is delivering remarks as he speaks live on the LBC Radio.
Key quotes (via Reuters)
Crude oil WTI 4-hour chart
Spot rate: 70.94
Relative change: 1.60%
Main Trend: Bullish
Resistance 1: 71.41-63 zone, Sept.4 high-July 13 high
Resistance 2: 73.00 figure and supply level
Resistance 3: 75.00 figure
Support 1: 70.53 May 24 low
Support 2: 70.00 figure
Support 3: 69.44 June 25 high
Support 4: 69.30 August 24 high
Support 5: 69.00 figure.
Analysts at Nomura explained that the BOJ left its policies unchanged, as widely expected.
“As it introduced new forward guidance on short- and long-term rates while allowing more flexibility in JGB yields at the previous meeting, it likely wants to monitor the efficacy of policy changes/tweaks for now”
” Muted market reaction to Governor Kuroda’s press conference suggests the market accepted the forward guidance, and we expect JGB yields to stay low and stable. The introduction of forward guidance has reduced the risk of market misunderstanding, keeping the correlation between USD/JPY and rate spreads high.”
“As US yields rise, USD/JPY can smoothly appreciate, in our opinion.”
Arriving at the Salzburg summit, Irish Prime Minister Leo Varadkar said that they were no closer to reaching a Brexit deal than they were in March. The GBP/USD reacted negatively to these comments to erase around 30 pips in the last minutes and was last seen trading at 1.3130, losing 0.15% on the day.
“US data has been very strong so far in 2018, buoyed by fiscal stimulus, solid business investment and ongoing labour-market strength,” notes Standard Chartered economist Sonia Meskin.
“We expect this momentum to extend into H2-2018 and 2019. We upgrade our GDP growth forecast for 2018 to 2.9% (2.7% prior), 2019 to 2.6% (2.3%), and our core PCE forecast for 2019 to 2.2% (2.1%). Our core PCE forecast for 2018 remains 2.0%. We see the terminal fed funds target rate (FFTR) at 3.50% (3.00%) in the current business cycle, and forecast further 25bps rate hikes in September 2019 and December 2019.”
“We expect the FOMC to upgrade its median real growth projection at the September meeting, and see a decent chance that the Committee’s median non-accelerating inflation rate of unemployment (NAIRU) estimate will decline too.”
“We expect the FOMC to keep hiking even if core inflation remains benign. Since monetary policy works with a lag, we believe the Committee will be compelled to respond to accelerated growth momentum to keep inflationary pressures and financial stability risks in check.”
Analysts at Scotiabank explained that the BoJ left policy settings unchanged at today’s meeting, as expected.
“Policy makers are expected to maintain accommodative settings for some time to come, with inflation still lagging well below the BoJ target.”
“We think the JPY is liable to under -perform other G-10 currencies in the medium to longer run as policy settings will remain relatively loose while other central banks edge towards a moderately tighter stance.”
After spending the majority of the day in a relatively tight range near mid-0.72s, the AUD/USD pair gained traction in the NA session and rose to its highest level since August 30 at 0.7275. As of writing, the pair was trading at 0.7270, adding 0.72% on the day.
The strong performance of commodities led by a sharp rally in oil prices and an improved market sentiment on Wednesday seems to be providing a boost to the commodity-sensitive AUD.
On the other hand, since its run up to the 95 handle last Friday, the US Dollar Index is still having a difficult time determining its next near-term direction. Today’s macroeconomic data releases from the United States showed that housing starts in August increased by 9.2% to 1.282 million to surpass the analysts’ estimate of 1.235 million. However, the potential positive impact of this data was offset by a disappointing 5.7% decline seen in building permits. Meanwhile, a separate report revealed that the current account deficit in the second quarter eased to $101.5 billion from $121.7 billion. As of writing, the DXY was down 0.12% on the day at 94.50.
In the early Asian session on Thursday, the RBA is going to publish its quarterly Bulleting that includes a summary of latest economic and financial developments in Australia.
Technical levels to consider
The pair could face the initial resistance at 0.7285 (50-DMA) ahead of 0.7345 (Aug. 29 high) and 0.7375 (100-DMA). On the downside, supports are located at 0.7215 (daily low), 0.7185 (20-DMA) and 0.7140 (Sep. 17/Sep. 18 low).
In an interview with BBC, British Chancellor Hammond said that he was confident they would deliver the Chequers Brexit deal for Britain. Hammond further added that he believed British Prime Minister Theresa May would get their message across to the leaders of the EU member states, as reported by Reuters.
Austrian Chancellor Sebastian Kurz crossed the newswires in the last hour saying that the EU’s Barnier made “step towards Britain,” and they expected the UK to do the same. “Hard Brexit with no deal would be difficult for Europe, would be terrible for the UK,” Kurz further added, as reported by Reuters.
USD/JPY 4-hour chart
Spot rate: 112.31
Relative change: -0.05%
Main trend: Bullish
Resistance 1: 112.50 figure
Resistance 2: 113.18, 2018 high
Resistance 3: 114.00 figure
Support 1: 112.00-112.17 zone, figure and August 1, swing high
Support 2: 111.84 August 29 swing high
Support 3: 111.84 August 29 swing high
Support 4: 111.54 August 6, high
Support 5: 111.45 August 8 high
Support 6: 111.00 figure
Support 7: 110.75, July 23 swing low
Support 8: 110.00 figure
Support 9: 109.37 June 25 low
Prices of the barrel of the American reference for the sweet light crude oil are prolonging the upside today, recording fresh multi-day peaks in the mid-$70.00s in the wake of the DoE’s weekly report.
WTI in multi-day tops around $70.50
Prices of the barrel of the West Texas Intermediate are advancing for yet another session on Wednesday supported by the latest figures from the weekly report on US supplies by the EIA.
WTI moved higher after the EIA reported US crude oil supplies dropped by 2.057 mbpd during last week, missing initial forecasts.
Additionally, Weekly Distillate Stocks rose by 0.839 mbpd and Gasoline inventories decreased by 1.719 mbpd, bettering consensus.
Furthermore from the report showed supplies at Cushing diminishing by 1.250 mbpd, adding to last week’s 1.242 mbpd decrease.
In the meantime, the upside momentum in crude oil found extra wings in earlier comments by Saudi officials, who showed no apparent concerns in case the barrel of Brent climbs to the $80.00 mark in an scenario of supply disruptions.
In addition, US sanctions against Iran (expected to kick in on November 4) keep sustaining the sentiment around crude oil and could likely limit occasional dips.
Moving forward, Baker Hughes will publish on Friday its weekly figures for the US drilling activity.
WTI significant levels
At the moment the barrel of WTI is up 1.25% at $70.68 and a breakout of $71.89 (high Sep.4) would aim for $72.80 (high May 22) and finally $75.34 (2018 high Jul.3). On the flip side, the next down barrier emerges at $69.45 (21-day SMA) followed by $69.19 (10-day SMA) and then $67.23 (low Sep.7).