Daily Report – 25/04/2018

U.S. 10 years Treasury yields finally breached 3%.

Dow Jones 23884 / Dax 12372
Oil $67.90/bbl
Gold $1324/oz
UK: UK Brexit Sec Davis: Motion on Brexit Deal Will Be Amenable, If Parliament Rejects Deal, Negotiations ‘Will Fall’.
EZ: No Data.
North America: BOC Gov. Peloz speaks at 11:15 pm.

The 10-year U.S. Treasury yield, has finally reached 3 percent, a level it hadn’t topped in more than four years. In our report on Monday we wrote “Treasury yields should have a greater impact on the dollar’s flows. If 10 year rates break 3%, stocks could crash, leading to a broad based currency sell-off.”

The equity and forex markets have slipped against the dollar. This move triggered widespread short covering in USD/JPY and drove the pair to its strongest level in 2 months. The pressure is still weighing on the market, yet till now we don’t have confirmation that traders are starting to build long dollar positions. The ECB monetary policy meeting and press conference on Thursday are crucial for the fate of the EURO. If Draghi sounds dovish the 3 months main support at 1.2137 will be tested. 

There is very little on the economic calendar today aside from the EIA oil inventories at 1530BST which will be watched after the API data yesterday showed a surprise inventory build in crude. For the EIA inventories today, crude stocks are expected to draw down by -2.7m barrels (after a surprise drawdown of -1.1m barrels last week), with distillates expected to draw down by -0.8m (-3.1m last week) and gasoline stocks in drawdown by -1.1m barrels (-3.0m barrels last week). Traders of the Loonie will be on the lookout for the comments from the BoC Governor Poloz after his dovish comments over the weekend further hit the CAD.

 

Today’s Snapshot
CLM8 Last $ 67.90/bbl.

Oil prices have ranged between 66.50 and 69.50 for the past 8 days. The immediate consideration is that supplies have tightened. OPEC compliance to its agreement has exceeded targets. Speculation that the US could re-impose sanction on OPEC’s third largest producer, Iran, as early as May 12, is also cited as a factor. While demand cannot be ignored. The International Energy Agency is conservative with a forecast that global oil demand will rise 1.5 m barrels a day this year to 99.3 m. OPEC estimates demand growth at 1.6 m bpd and the US EIA is boldest with a 1.8 m bpd increase projected. With that in mind, the short term outlook for the crude oil price is to consolidate to higher levels. First resistance at 69.52, second resistance at 70.45. First support at 66.30, second support at 65.45.

Written by:
Nehmat Harb
Financial Advisor

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