Trader thoughts - energy causing gyrations in markets

Near-term, probably the highlight for me on the session has been the moves in Crude, gasoline and nat gas. Once again, we find ourselves at the mercy of headlines around whether the US and now China will release Crude reserves into the system – the talk is Biden is trying to onboard Xi to join in the reserve dump during their virtual summit – this saw Crude push into $77.71, although the downside was limited by a solid 2.1m barrel draw in the weekly DoE inventory report.

Crude daily

(Source: TradingView - Past performance is not indicative of future performance.)

For Crude traders, the 50-day MA has supported (on the daily) and we see the 4 November swing low also holding, but it’s on shaky ground – If this genuinely cracks then I look for the former highs of $76.95 to come into play and if that goes then I’d be targeting $72 – Let's see how price reacts here. Energy is a key component of the inflation trade.

Oil proxies have been sold and by extension that’s feeding into AUD weakness and the Commodity plays too – AUD is being taken down, with AUDUSD printing a lower low and I’d be moving my stop lower from Monday's short call. AUDJPY should be on the radar as that has had the biggest percentage move in G10 with the JPY finding buyers easy to come by – maybe that’s a cover of the carry trade, but the JPY is universally strong.

Is this a risk aversion move? Perhaps, but there's obviously no panic at all. US Treasuries have caught a bid and we see yields 5bp lower in 10s – the Russell 2k (US2000) is -1.2%, while it was a defensive day in the S&P 500 with energy and financials taking out the point, while REITs, health care and utilities.

Gold has pushed higher with real rates moving a touch lower – XAUAUD has naturally benefited from the weakness in the AUD printing a new high in this run – a factor I touch on the video.

EURGBP has printed a lower low, with UK headline inflation printing 4.2% (vs 3.9% eyed) – it feels like this can hold even though we’ve moved from 0.8560 to sub-0.84 in a matter of days. The rates market now fully prices a 15bp rate hike from the BoE in its 16 Dec meeting.

EURCHF daily

(Source: TradingView - Past performance is not indicative of future performance.)

EURCHF should be on the radar – divergence has come up between price and the RSI – with the SNB potentially ready to intervene, could EURCHF be ready to reverse higher?