Oil falls below $63 in reversal on the anniversary of negative plunge as ugly candle forms

It’s been one year since oil was negative

WTI is down 88-cents today to $62.53in a disappointing reversal after hitting a one-month high of $64.38 earlier today.
We’re into the roll today so I’m looking at the June contract.
The important recent move was on April 14 when crude jumped 5% and broke out of a three-week range. The low since then is $62.53 so that’s important support for today and it’s just given way. As it stands, that puts an ugly bearish engulfing candle on the chart.
It's been one year since oil was negative
Iran touted some progress in nuclear talks today so that could be weighing but I think it’s the broader risk tone that’s undermining crude. Airline and cruise stocks are being battered today on reopening worries. There isn’t much talk about it but mediocre vaccine takeup in the US is creeping in as a story and I wonder if that begins to sting. The US government is planning a huge advertising push imminently so hopefully that helps.

Yen crosses are making it interesting. Three to watch.

Yen softens, then comes back

EUR/JPY touched the highest today since 2018 in what looked like a breakout. The high was 130.97 but it ran into offers at 131.00 and has quickly dropped back to 130.41.
That’s left the chart looking like this:
EUR/JPY chart
Optimism in Europe is building and the real battle between these two is which economy will be the funder. Old habits die hard so the thinking is that Europe will eventually get on its feet at the end of the pandemic and (one day) escape ZIRP.
The bad news is that European cases are still climbing, particularly in France. The thinking though is that this will be the last wave as the virus is overwhelmed by vaccines in May/June when supplies are expected to jump.
It’s not just the EUR/JPY chart that’s interesting, NZD/JPY broke to a one-month high today but has now fallen back below the old high.
NZDJPY chart
On the flipside is CAD/JPY, which is flirting with a breakdown. The loonie is the laggard this week and the Bank of Canada decision is tomorrow, so this will be a chart to watch. This has been the trade of the year so far, but a break below the mid-March lows could signal a deeper correction.
cadjpy CHART

Vaccines matter most right now

Laser focus

Laser focus

Last week the news that Johnson and Johnson’s vaccine caused blood clots sent a shiver down markets for a few minutes. Once the headline was digested it was realised that there were still vaccine alternatives to replace J&J’s even if there was a delay in the roll out. This was underlined by White House COVID Coordinator Zients who stated last week that there is plenty of vaccine supply in the system, even without J&J’s COVID-19 vaccine and that the US Gov’t is doing everything it can to accelerate the Pfizer and Moderna vaccines.

Ok, panic over. The dip was bought on the headline last week.

However, it is interesting to note that in stark contrast to the inflation fears, which came to nothing last week, the market remains laser focused on the vaccine roll out. So, right now, vaccines matter most. This is not to discount inflationary pressures, but simply to say the focus is still more on vaccines than inflation right now.

One interesting headline from last week that could be lost in the mix is the fact that Novavax will be taking part in a Oxford University study comparing mixed COVID-19 vaccine combinations from different manufacturers. The idea of the study is to explore any potential possibility there is of mixing doses. This will be extremely helpful if a ‘mix&max’ combination is possible and should help speed up the vaccination process and reward manufacturers who can supply the most quickly. One report to look out for as it could give risk assets a positive boost if the study proves positive.

US expresses deep concerns re Russia’s plans to block parts of the Black Sea

US State Departyment statement says expresses deep concerns regarding Russia’s plans to block foreign naval ships and state vessels in parts of the Black Sea. State dept. calls on Russia to stop harassment of vessels and reverse the build-up of troops at the Ukraine border

USD/JPY is dripping just a tad lower. Its not clear this is a response to the uptic in geopol tensions. The USD is lower against AUD and NZD so perhaps not. Will keep digging.

UK media report that “Russia ‘planning large-scale warship assault on Ukraine water supplies'”

UK’s Mirror newspaper with the report,

Vladimir Putin’s warships are building-up near Ukraine and Moscow now has at least 150,000 heavily armed troops on the border and in Crimea – experts fear Russia will seize water supply facilities

Mirror citing ‘military sources believe’. Unnamed sources and there is little further in the report.
ukraine russia water
And, a friendly reminder that spam in the comments will be treated as spam.

People’s Bank of China rate decision due today – preview

The PBOC 1 and 5 year loan prime rate (LPR) setting decision is due at 0130GMT Tuesday 20 April 2021.

  • 1 year expected 3.85%, prior 3.85%
  • 5 year expected 4.65%, prior 4.65%

Expectations are the one-year LPR will be left unchanged for the rest of 2021. Its been unchanged since May 2020.

The LPR is set in reference to the rate on the PBOC’s medium-term lending facility (MLF), its a lending reference rate set monthly by 18 banks. The PBOC conducted MLF lending last week, and kept the rate unchanged. The past 3 times that the LPR was changed was preceded by a change in the MLF rate. Hence, an unchanged MLF rate is a signal the LPR rate will remain unchanged today. Latest surveys of analysts show expectations are the 1 year LPR will remain unchanged for the balance of this year at least – officials in China are wary of any interest rate move that may lead to a stifling of the post-pandemic economic recovery.

The PBOC 1 and 5 year loan prime rate (LPR) setting decision is due at 0130GMT Tuesday 20 April 2021.
Go to top