The latest weekly report from the US Energy Information Administration delivered what Saxo Bank head of commodities strategy Ole Hansen calls "a trifecta of bullish news" for crude with WTI surging to resistance at $63.15/barrel.
"Stocks are down, production is flat, and exports are surging," notes Hansen, adding that the rally in WTI brings prices to the 61.8% retracement of the January-February selloff. "If we break through this level, we can say that we have established a bottom," Hansen concludes.
Gold, meanwhile, has endured its worst week since early December on the back of a stronger USD and a hawkish federal Open Market Committee, but in Hansen's view the US rate hike calendar is not necessarily gold-negative given the metal's history of quick recoveries from rate rises.
"Expectations for four rather than three 2018 rate hikes are growing, but the hikes are not really the issue as far as gold is concerned; instead, it's the speed of the hikes," says Saxo's commodities head.
In forex, Saxo head of FX strategy John J Hardy reports that the dollar remains stable following a suite of massive US Treasury bond auctions totaling $279 billion. "Demand for Treasuries remained within range despite the massive size of the auctions, so we see a broad lack of concern on the greenback," he notes.
Despite the dollar's strength, USDJPY fell lower Thursday with the yen now trading at some remove from broader market movements. "It feels like the market may be reassessing some its assumptions on the Japanese currency," says Hardy, "adding that in his view the yen remains "quite cheap".
One way to play the strong yen trend is through EURJPY, where prices are currently sitting at the 200-day moving average, with Hardy noting that a break of this level could see a pronounced move lower.
Finally, next week sees a key event for USD and FX in the form of Federal Reserve chair Jerome Powell's address to Congress Wednesday.
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.