Commodities Daily - July 7, 2021

> Oil tumbles amid dollar strength and OPEC+ uncertainty. Today, all eyes will be on the FOMC minutes and the API's US oil and refined product inventory data due overnight. After yesterday's correction, we believe Brent is unlikely to suffer further losses and is more likely to start generating some gentle positive momentum, rising above $75/bbl amid upbeat fundamentals with the market refocusing on the lack of supply.> Gold gives up early gains even as US Treasury yields slide. Gold ended the day slightly above $1,795/oz yesterday, while the 10y US Treasury yield fell to 1.35%, as the June services PMI readings from the US were slightly weaker than expected. Today, gold has been trading near $1,800/oz. The key items on the macro agenda are the latest FOMC minutes, the May JOLTS job openings data from the US and updated economic forecasts from the European Commission. Bullion may try to retest support at $1,790/oz today.OIL TUMBLES AMID DOLLAR STRENGTH AND OPEC+ UNCERTAINTY Brent sank $3.7/bbl yesterday, dropping from $77.8/bbl to $74.1/bbl as a stronger dollar spurred a broad selloff across commodities while the OPEC+ crisis left the market wondering whether supply will rise or fall. The dollar gained against a basket of peers following the long US Independence Day weekend and amid disappointing European data that sent the euro to a three-month low against the dollar. Investor sentiment in Germany, the eurozone's biggest economy, remains high but fell sharply in July, according to ZEW, while orders for German-made goods posted their sharpest drop in May since the first lockdown in 2020. The greenback's move came despite a decline in US Treasury yields after data signaled slowing growth in the US services sector. The ISM US services PMI for June softened, likely due to labor and raw material shortages, resulting in unfinished work continuing to pile up.The main shadow over the oil market right now is the OPEC+ crisis, which has sent oil prices lurching as the cartel has left the market wondering whether supply will rise or fall. Oil prices briefly jumped to their highest in more than six years at yesterday's opening after a bitter dispute between Saudi Arabia and the UAE blocked a much-needed production increase. Within hours, the rally had turned into a rout, not only amid the sharp dollar strengthening but also as traders were speculating that the breakdown of talks could ultimately result in an uncontrolled surge in OPEC+ oil supplies, of which there could be more than plenty. Furthermore, Bloomberg, citing bankers and oil executives, reported that more evidence is emerging that US shale producers are taking advantage of the recent price rally to lock in the price of their future output.Brent is trading at $74.5/bbl as we write. White House Press Secretary Jen Psaki said yesterday that US officials have been speaking to both Saudi Arabia and the UAE in hopes of reaching an agreement to stem the rise in oil prices. Pressure from the largest oil consumers could force OPEC+ back to the negotiating table. Today, all eyes will be on the FOMC minutes and the API's US oil and refined product inventory data due overnight. After yesterday's correction, we believe Brent is unlikely to suffer further losses and is more likely to start generating some gentle positive momentum, rising above $75/bbl amid upbeat fundamentals with the market refocusing on the lack of LD GIVES UP EARLY GAINS EVEN AS US TREASURY YIELDS SLIDEGold tried to consolidate above $1,800/oz yesterday and even reached $1,815/oz early in the US session, but it ultimately failed to hold on and finished the day near $1,795/oz. The 10y US Treasury yield fell from 1.42% to 1.35% yesterday, providing support for bullion. Meanwhile, EUR/USD slid to 1.182, which weighed on gold prices. Eurozone retail sales rose 4.6% m-o-m in May, topping the consensus estimate of 4.3% growth, which provided a boost to gold during the European trading hours. The June IHS Markit US services PMI came in at 64.6, which was slightly lower than the expected 64.8 but still near the recent record high level. The ISM US services PMI also came up short of the consensus, printing at 60.1 in June versus the expected 63.5. The ISM report indicated that demand for services has been quite strong with Covid-19 restrictions being lifted, but it also indicated that service providers have faced supply chain issues and worker shortages. The signs of a slowdown in the US economic recovery provided some support to gold yesterday, but not enough to offset the impact of the dollar's strengthening.During the Asian session today, gold was hovering near $1,800/oz. The main item on today's macro agenda is the publication of the latest FOMC minutes late this evening. The minutes from the June Fed meeting could provide more insight into the Fed's current policy stance and when it may signal a start to tapering. The May JOLTS job openings data is also due from the US today, while the European Commission is scheduled to publish updated economic forecasts. If hawkish signals appear in the FOMC minutes, bullion could attempt to retest support at $1,790/oz today, with a break below opening the way to the next support level of $1,775/