WTI – Set for rebound as Oil selloff looks overdone
Buy trade idea explained.
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Petar Jaćimović
FXCentrum
Petar Jaćimović was born on 8 July 1989 in Jagodina, Serbia.
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AUD/USD is defending 0.7000 at the start of a new week, trading near its lowest level since August 4 amid a bullish US Dollar. US yields hold near multi-year highs amid inflation risks from higher oil prices and rising bets on an October Fed rate hike. This, along with the US-Iran standoff, continues to underpin the safe-haven buck and weigh on the pair ahead of Tuesday's RBA policy announcements.
USD/JPY finds dip-buyers and reverses part of Friday's slide driven by speculation that authorities will step in again to prop up the Japanese Yen. However, the BoJ's dovish Minutes cap the JPY. Meanwhile, the US Dollar regains traction as the US-Iran standoff supports crude oil prices, fueling inflation fears and reaffirming bets for an October Fed rate hike. This further supports the pair, driving it back toward 158.00.
Gold is falling hard at the start of a new week, targeting $4,100 for the first time in eight weeks. Firming October Fed rate-hike bets, along with oil-driven inflation risks, keep US bond yields elevated near multi-year highs, helping the US Dollar hold firm, particularly after Trump rejected Iran's truce offer. These factors weigh heavily on the bullion.
Zcash price hovers below $1,550 on Monday, extending losses after a 4% decline the previous day. Institutional interest in the privacy coin holds firm, recording over $35 million in inflows last week, while retail speculation takes a hit, with ZEC futures Open Interest down around 10% in 24 hours.
Markets will look for fresh evidence of a hot US economy from this week as September figures start to flow in. Upside surprises in jobs data could take rate hike pricing for the October FOMC above 20bp. It’s not our baseline though, and we expect some stabilisation with modest downside risks for USD in the coming days. We expect a hawkish hike by the RBA tomorrow.
The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.
