Today market outlook

[Zeologic]

WTI oil correction after two-day sharp decline

Yesterday's oil price drew a small bearish candle with a shadow on the top of the candle. Oil price formed a high of 65.52, a low of 64.10, and a close of 64.48. The correction in oil prices briefly halted a two-day-long decline after the Middle East ceasefire.

The ceasefire in the Middle East has eased concerns about oil supply disruptions, keeping the price of a barrel for the US benchmark WTI below $65.00. Although the ceasefire may be fragile because Iran continues its peaceful nuclear program, while Israel accuses it of developing nuclear weapons.

Iran's oil supply capacity seems unaffected by the Israeli bombing, and the threat of a blockade on the key Strait of Hormuz has been averted for now. All these circumstances have contributed to bringing prices back to pre-war levels.

Meanwhile, investor concerns about demand remain as the U.S. economy shows signs of slowing. Consumer confidence deteriorated in June, confirming the gloomy picture. Meanwhile, Powell’s hawkish stance in his congressional testimony on Tuesday added to the downside pressure on prices.

Fed Chairman Jerome Powell has not signaled any imminent rate cuts as he said the risk of higher inflation stemming from Trump’s tariffs remains high. The Fed’s tighter policy is weighing on economic activity and oil demand, adding to the downside pressure on prices.

The latest data from the EIA showed a drawdown of 5.836 million barrels for the week ended June 20, far exceeding expectations for a modest 0.6 million barrel decline. The supply drawdown signals a tightening of supply conditions amid steady summer demand.

The Eurozone economy is stagnant, while China's recovery has not yet been achieved, the plan of OPEC+ countries to continue to increase supply may cause an oversupply of Oil.

Investors today will focus on the final US GDP data, which is estimated to have contracted -0.2% the same as the previous quarter. US Unemployment Claims are estimated to slightly decrease by 244k from the previous revision of 245k.

[Zeologic]

USD/CNH steady in the range of 7.1678 amid Yuan campaign

On Friday, the offshore Yuan pair USDCNH drew a bullish candle with a slight shadow on the top candle. The price formed a high of 7.1748, a low of 7.1598, and a close of 7.1707. It is steady between the middle and lower bands of the contracting Bollinger bands.

Amid the USD challenges, China is trying to seize the moment to globalize the Yuan as doubts grow about the USD. According to Bloomberg, Chinese policymakers see erratic US decision-making and geopolitical tensions as the most favorable backdrop in recent years to promote the yuan. The move is aimed at facilitating trade and opening up China's financial markets and embedding the yuan deeper in investment flows.

China's central bank governor Pan Gongsheng envisioned a new global currency order in which the US dollar plays a smaller role and the Yuan plays a major role in global capital flows. He plans to set up an international operations center for the digital yuan in Shanghai.

In 2025, the Chinese government is targeting 5% growth, and in the first quarter recorded a 5.4% year-on-year expansion, higher than the 5.1% expectation. However, official annual growth is estimated at 4.5% to 5% by institutions such as the OECD (4.7%), Goldman (4.0%), and Moody's (3.8%), which projected a slightly lower figure.

In the economic sector, industrial and export performance declined in May due to weak demand and tariff pressures. The property sector is also still weak; the Evergrande & Country Garden crisis was exacerbated by liquidation to large-scale restructuring, and this sector is a major drag on growth. Household consumption is -39% of GDP, but stimulus and trade-in have boosted consumer spending. PPI is negative, and consumer inflation remains low; there is a risk of deflation due to weak domestic demand.

Trade tensions with the US continue to be an external and geopolitical challenge. However, on the other hand, energy diversification has helped reduce vulnerability to global supply disruptions.

China's long-term challenges include an aging population, a drastically declining ratio of workers to retirees, and hampered productivity. Suboptimal services in the transformation of the economy from industrial exports to consumption and dependence on foreign technology, especially semiconductors, continue even though the Made in China 2025 program has shown success in high technology such as EV, AI, solar, etc.

Today, CFLP (China Federation of Logistics & Purchasing) will release Manufacturing PMI data with expectations of 49.6 from the previous revision of 49.5.