There’s a lot going on in the markets at present as traders and investors try and get their heads round the various competing forces. Brent crude is rising for a sixth straight day and is making three-year highs through $80. The global energy crisis is a key focus which may only get worse as we head into winter.

Demand is outstripping supply as the gas crunch spreads around the globe, propelling prices to new parabolic peaks. The lack of natural gas is forcing a switch to oil as an alternative for power generation. The global economic recovery is also seeing more demand in general, with a pickup in airline traffic depleting low oil inventories.

Brent crude has surged past the year-to-date high made in July at $77.46. The May 2018 top sits at $80.47 ahead of the October 2018 mark at $86.60. Prices are overbought on the daily RSI and have cut through the upper band of the Keltner channel so a pullback may be in order soon.

Bond yields ripping higher, fuelling the dollar

Having seemingly not paid too much attention to the Fed’s hawkish shift last week, markets are hitting bond markets hard, which means yields are flying north. The widely watched 10-year US Treasury yields hit 1.51% and the shorter end five-year yield touched levels last seen in February 2020.

Notably, this is pushing USD/JPY higher, with JPY also suffering as a large energy importer.

Buyers took out the August high yesterday at 110.80 and now have their eyes on this year’s top at 111.659. A break through here could see a push towards 112.25.

The dollar looks to now be breaking higher on the DXY, with the year-to-date high at 93.72 now within sight. EUR/USD is similarly looking towards major levels, with 1.16639 key support. The energy crisis and shortages mean the backdrop is fragile which is also helping the greenback.

ECB Sintra symposium

The ECB conference at Sintra kicks off today. This has delivered some historic shifts in ECB policy in the past – recall President Mario Draghi’s uber dovish comments in 2019.

Nothing of that magnitude is expected this week but eurozone inflation numbers at 13-year highs released on Friday should sharpen the minds, or at least the hawks’ talons.

Does the ECB still view inflation as “transitory”? And will we get any hints on how the emergency bond buying programme (PEPP) will end next March?

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