Markets wait for Powell

China shares continue losing streak

Markets were holding their collective breaths in the Asian session today, waiting for the first of Fed Chairman Powell’s testimonies on Capitol Hill. Equity markets were mixed, though the majority traded marginally in the red. China shares extended the recent losing run to a seventh day, the longest streak since December 2016, despite reports of a “constructive” restart to US-China trade negotiations by phone. The US30 index slid 0.01% while the NAS100 index extended its stronger close with gains of 0.06%.

China50 Daily Chart

Source: OANDA fxTrade

Currencies steady

There wasn’t much activity to talk about in currency markets, though the Aussie underperformed in the G-10 space after disappointing confidence data. Westpac’s index of consumer confidence fell 4.1% in July, accelerating downward from June’s 0.6%. Westpac described the number as “troubling”, especially as it came after a second RBA rate cut, tax relief packages being announced and signs that the housing market might be stabilizing.

The Aussie slid 0.11% versus the US dollar to 0.6920 and 0.07% versus the Japanese yen to 75.36. AUD/USD has now fallen for the past five days and has retraced 1.8% from the July 4 peak after failing to overcome resistance at the 100-day moving average, which is at 0.7025 today.

AUD/USD Daily Chart

Source: OANDA fxTrade

Oil extends gains

Oil prices continued yesterday’s bullish theme today, with West Texas Intermediate (WTI) rising 0.48% to $58.55 per barrel. WTI looks set to close above the 55-day moving average at $58.28 for the first time since May 21 while the 100-day moving average at $59.02 could act as the next resistance point.

Weekly stockpiles data to July 5 released by the American Petroleum Institute yesterday showed a drawdown of 8.13 million barrels, an increase on the previous week’s 5 million barrel reduction. This might imply that demand is picking up just as OPEC+ extended the current production cuts. In addition, the National Hurricane Center cautioned that a cyclone may be building over the next 48 hours in the Gulf of Mexico, which could affect supplies.

WTI Daily Chart

Source: OANDA fxTrade

Powell to steal the limelight

Aside from Powell’s testimony, the minutes of the last Fed meeting are due to be released, but will no doubt be overshadowed (and updated) by Powell’s testimony. The Bank of Canada is expected to leave rates unchanged at 1.75% at today’s meeting with market pricing now suggesting a near-25% probability of a cut only at the October meeting.

Earlier in the session, the UK reports manufacturing and industrial production data for May, with both expected to show a small rebound from April’s negative number. The goods trade deficit is seen widening to GBP12.55 billion from GBP12.11 billion.

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