Trading Crude Oil – A dead cat bounce?

Good morning,

- RBA's Lowe: " $AUD fall helping economy adjust to mining boom wind-down. Also, Economic fundamentals strong, cause for optimism. Living standards improvement rate unlikely driven by RBA, we still have flexibility on interest rates, we still have flexibility on fiscal policy if needed.''

- We are witnessing the most distinct split in monetary policy views last seen back in 2008.

- $NZD was the best performing major vs $USD on Monday with +0.48% spot-returns while $CAD was the worst performing with -0.41% returns.

- WTI Crude Oil futures has been in the news for the most of last week as prices attempted to stage a strong rally after staying range bound for nearly 5 weeks after hitting a multi-year low to $39.86. As of Friday, 9th October, NYMEX Crude Oil closed at $49.63 prompting many to question whether Crude Oil prices are on a rebound or if this rally was merely a dead cat bounce...In early September this year, Goldman Sachs in a note to its clients forecasted that Oil prices could fall further to as low as $20. With a bearish outlook on Crude Oil, it is no wonder that any little rally in the commodity is keen to attract market attention....The current rally in Crude oil is likely to see prices correct towards $60 handle before the downtrend is likely to resume. The untested support level at $36.50 is the most likely price point following which we can anticipate a bottom being formed ahead of a strong correction towards the $80 handle in the next couple of months.

- Fed's Brainard: Fed has more tools now to counter stability risks..Important for Fed to take market views into account. Best Fed can do is communicate clearly on policy..Can benefit from studying negative rate experience... 2% inflation is a target, not a ceiling for policy...Against removing policy support prematurely. Domestic U.S. real activity 'reassuringly resilient'...suggests she is more sensitive to global conditions. Gives a more dovish sentiment than many of her colleagues.. Near-term inflation outlook risk tilted to downside. Don't take domestic demand growth for granted.

- The Chinese September trade balance hit its highest level in Yuan terms since records started in 2013.....that's not a very long historical period. And the 17.7% drop in imports necessary to accomplish the jump in balance isn't good......especially not for the Aussie Dollar and other Comm currencies. Let's see those Dollar term figures. No time release for those though.

- New Zealand's Finance Minister Bill English: New Zealand economy could expand less than 2% in 2015.

-Some BOJ Members: Temporarily negative core CPI due to oil, negative CPI doesn't show change in trend..See inflation trend continuing to improve...Exports, production have been more or less flat recently. Economy continued to recover moderately.

-Markets across Asia fell amid worries that Chinese export data later Tuesday will add more evidence that the world's No. 2 economy is stalling. The Shanghai Composite Index was down 0.8% at 3262.16, and Hong Kong's Hang Seng Index fell 0.2% at 22677.60. Japan's Nikkei Stock Average and Australia's S&P/ASX 200 were each down more than 0.8% while South Korea's Kospi lost 0.3%. While China's stock market has stabilized from its dramatic swings of this summer's selloff, "the issue is that we may see further weakness in the composition of exports," said Evan Lucas, market strategist at brokerage IG.

Barclays: EUR/USD: We were wrong to expect selling interest near 1.1320 to cap upticks. The break above 1.1320 signals further upside towards the 1.1460 range highs. Overall our greater view is bearish against resistance in the 1.1810/75 area. USD/JPY: No change. We are overall bullish and would buy dips within range against the 118.65 lows. A move above resistance in the 121.30 area is needed to signal upside traction towards our initial targets near 121.75. Beyond there, we are looking for a move higher towards the 123.35 area.

- Remember the 2008 financial crisis? Well, it's back. The financial disaster, which started seven years ago with the collapse in US real estate and investment banking, has entered its third phase, according to a team of Goldman Sachs analysts. This wave is characterised by rock-bottom commodities prices, stalling growth in China and other emerging-markets economies, and low global inflation, Goldman Sachs analysts led by Peter Oppenheimer said in a big-picture note.

- UK Inflation, BOE Testimony Key for Pound and Risk Appetite Alike.

- G-20 meeting concludes to review of downgraded GDP, warning of financial risks.

- Major news for today: GBP CPI, GERMAN ZEW, NFIB Small Business Index.

Have a great day!