US crude has posted gains on Tuesday, reversing directions after sharp losses on Monday. In the North American session, WTI/USD futures are trading at $48.05 per barrel. Brent crude flirted with the $50 level earlier on Tuesday and is currently trading at $49.84. Currently, the Brent premium stands at $1.79. In economic news, the Richmond Manufacturing Index came in minus -11, well short of expectations. US New Homes Sales sparkled with a gain of 654 thousand, well above the forecast of 575 thousand. On Wednesday, the US releases Crude Oil Inventories, with the estimate standing at -0.7 million. We’ll also get a look at additional housing data, with the release of Existing Home Sales.
US numbers were a mixed bag on Tuesday. The Richmond Manufacturing Index dropped sharply, dropping 11 points. The markets had expected a strong gain of plus -6. There was much better news from the housing sector, as New Home Sales jumped to 654 thousand, marking a 12.4 percent increase. This was the highest number of new home sales since 2008, pointing to strong consumer demand. Will Existing Home Sales follow suit with a strong release? The indicator came in at 5.57 million in June, and the estimate stands at 5.55 million.
Crude has enjoyed a stellar August, jumping 15% and erasing the sharp losses seen in July. The commodity has rebounded with gains on Tuesday, buoyed by a red-hot New Home Sales report. Next up is Crude Oil Inventories on Wednesday. With the markets expecting a second straight decline, we could see oil prices continue to rise. A recent report from the well-respected International Energy Agency (IEA) projected that demand for oil will increase in the third quarter and that the global oversupply could disappear, which would lead to higher crude prices.
Ahead of the Jackson Hole meeting, investors are sticking to the safety of the sidelines, unwilling to make any major moves. This has resulted in a lack of movement in the currency markets so far this week. The conference, which begins on Thursday, will bring together the heads of central banks and other senior financial officials. The markets will be looking for hints from Federal Reserve chair Janet Yellen regarding the Fed’s monetary plans, particularly the timing a rate hike. FOMC members are expected to express their views in the days leading to the crucial meeting. Fed Vice Chairman Stanley Fischer took the opportunity and sounded upbeat about the US economy, saying that the Fed was close to its aims of a full labor market and the inflation target of 2 percent. The latter claim sounds a bit optimistic, as US inflation levels have consistently been closer to zero than the 2 percent level. Janet Yellen will likely address the inflation issue at Jackson Hole, as inflation levels will be a crucial factor in whether the Fed pulls the rate trigger before 2017. The odds of a September hike are only about 12%, while the likelihood of a December move is around 40%.
Tuesday (August 23)
- 9:45 US Flash Manufacturing PMI. Estimate 53.1. Actual 52.1
- 9:59 US Richmond Manufacturing Index. Estimate +6 points. Actual -11 points
- 10:00 US New Home Sales. Estimate 575K. Actual 654K
Wednesday (August 24)
- 14:00 US Existing Home Sales. Estimate 5.55M
*Key events are in bold
*All release times are EDT
WTI/USD for Tuesday, August 23, 2016
WTI/USD August 23 at 11:30 EDT
Open: 47.24 High: 48.33 Low: 46.60 Close: 48.05
WTI USD Technical
- WTI/USD showed limited movement in the Asian and European sessions. The pair has posted strong gains in North American trade.
- 46.69 is providing support
- There is resistance at 50.13. This line has held firm since June 23
Further levels in both directions:
- Below: 46.69, 43.45 and 39.32
- Above: 50.13, 53.50 and 56.50
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