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Geo-political risk to dictate price action

Five markets in focus today: US Light Crude, Spot Gold, Australia 200 Cash, Fairfax and NZD/USD.

Crude oil
Source: Bloomberg

US Light Crude

While Brent Crude is usually the commodity which reacts more to geopolitical tension, recent events actually seem to have cause a bigger reaction in WTI. Over the past few days WTI has surged from around $100 to $104 and looks poised to extend its gains in the near term. WTI hit highs just shy of $108 in June and should the current tension heighten then we could see those levels retested in the near term. The latest reports suggest the US has imagery of the missile involved in the MH17 crash and proves Russian separatists’ involvement. At the same time the death toll in the Middle East just continues to rise and this is also likely to have a play on oil.

Spot Gold

The precious metal is likely to remain volatile as various headlines around heightening geopolitical tension continue to hit the wires. Economic data is limited which leaves geopolitical risk as the main source of volatility. Gold popped back above 1300 after finding support and sellers are likely to be discouraged by the latest developments. Near term resistance is at 1316 which is the 50% retracement of the March to June drop.

Australia 200 Cash

The local market is looking to extend its gains this morning with our current call suggesting we’ll open 0.4% higher at 5552. This puts us within reach of last week’s high of 5561 with defensives likely to lead given the current uncertainty in the risk space. A potential spike in energy prices will also be a source of concern and could hamper the recovery. As a result, the local market faces a real test as it knocks on key resistance levels in this region. I wouldn’t be surprised to see some profit taking and a degree of caution.

Fairfax

The media company will be in focus on reports Gina Rinehart is considering a takeover.  FXJ surged significantly in February on the back of its interim report and has been fairly stable since then. With around 14.99% shareholding in FXJ, Gina Rinehart has a vested interest in how the company is run and there have been suggestions recently that she’s not too impressed. These reports could have an impact on how the stock trades today.

NZD/USD

Chris Weston will be analysing the kiwi dollar in the one to watch section as we head into yet another rate decision. The market expects the RBNZ to hike rates yet again.

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