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OPEC+ deal fails to inspire oil bulls After a short-term positive reaction to the OPEC+ deal on Friday, crude oil prices struggle to show a sustained recovery as the exporters agreed to curb output by 1.2 million barrels a day. Despite a consensus was finally reached, investors refrain from aggressive buying as there are some doubts that all the members of the group will fulfill their obligations honestly. Traders also fear that the agreed cuts won’t be enough to balance the global market. In other news, Libya’s state oil company NOC declared a shutdown of its biggest oilfield. This could lead to an output loss of over 300,000 barrels per day. Traditionally, supply disruptions have only a short –term effect on crude oil prices, but this coupled with the OPEC+ deal could at least help Brent to remain afloat for the time being. Meanwhile, the US shale activity remains a downside risk for the market, as well as doubts surrounding the deal between the OPEC exporters and their allies. As such, we don’t see a high probability of prices rising back to-wards the $70 barrier. However, the overall market picture looks better now. In the short term, Brent needs to firmly get back above $62 to avoid profit-taking.
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by HelenRush
Dollar’s path hinges on Fed rate hike bets The greenback is mixed on Friday as traders take a cautious tone ahead of the key US NFP employment report. The release could bring back short-term volatility in the dollar pairs but the broader picture will still depend on the Federal Reserve rate hike bet. The US-China trade war, prospects of slower global growth, and a more cautious tone by the Fed make inves-tors worry about the potential pause in rate hikes at some point in 2019. The base-case scenario now implies that after a hike in December, the central bank will stop monetary policy normalization should the effect from fiscal stimulus start to ebb, and the trade war consequences affect the economy. However, as long as the US GDP and CPI growth rate stays robust, the Fed will unlikely send the markets a clear ‘dovish’ signal. In this context, there is no eminent threat to the dollar’s bullish trend in the short- to medi-um term. However, should the yield curve stay inverted, and the 10-year Treasury yields continue to decline, re-cession worries could come to the fore. In this case, the greenback will have to turn to defensive.
NSE:DOLLAR
by HelenRush
Huawei incident could play into yen’s hands Global markets are trading in a risk-off mode on Thursday amid a potential escalation of US-China trade tensions despite the two countries reached a 90-daycease-fire a few days ago. The Huawei Technologies executive was arrested in Canada at the request of the United States. The arrest is related to the supposed violation of US sanctions on Iran and now Meng Wanzhou is facing extradition to the United States. Meanwhile, China demands her release. The incident has spooked investors that are starting to price in another spike in US-China tensions. As a result, the European currencies came under pressure, while the safe-haven yen demand has spiked, dragging the USDJPY pair below 113.00 again. Should the episode with the Huawei executive evolve into a major dispute between Washington and Beijing, the fragile hopes for resolving the existing trade issues will dissolve. Consequently, the unnerved investors could rush for safe assets with renewed vigour, which will play into yen’s hands even as the greenback shows a relative resilience to the declining US Treasury yields. So the USDJPY pair could challenge the intermediate support at 112.30, a break of which will open the way to the 112.00 threshold.
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by HelenRush
Oil market on edge ahead of OPEC+ meeting Crude oil prices show a mixed dynamics this week amid the contradictory signals ahead of the crucial OPEC+ summit in Vienna. After the Monday’s rally, Brent dipped yesterday but managed to hold above the $61 thresh-old that is standing on the way to the key psychologically important support at $60. On Wednesday, the prices quickly derailed the $61 level but met buyers on a dip and turned positive on the day. Despite the current bullish bias, the downside risks are still there. OPEC members send ambivalent signals to the market, which doesn’t give confidence ahead of the meeting starting tomorrow. The cartel producers and their allies seem to be unable to find common ground, so the ex-pectations are mixed and uncertain. Russia and Saudi Arabia have agreed on the need to cut output but Mos-cow still opposes to cut by more than 1 million bpd. Meanwhile, Kuwait said OPEC+ nations haven’t yet even discussed proposals to cut production. Considering a high degree of uncertainty, the path of least resistance for Brent is on the downside in the short term as traders could proceed with profit taking to trim risks. Generally, the market will face a heightened volatil-ity in the days to come, and traders will be disappointed if the group fails to meet their expectations for cuts around 1.3-1.4 million bpd.
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by HelenRush
Five reasons behind dollar weakness There is no reprieve for the greenback on Tuesday as all the major factors point to further waning of its attrac-tiveness. The US currency struggles to regain strength after the recent change in the Fed’s tone on tightening prospects. Recent investor optimism over the US-China trade negotiations added to the bearishness as well. Today, the PBOC has strengthened the yuan by the most since June 2017, which put the USD under further pressure. Also, we see a strong recovery in the European currencies as euro rises on hopes that Italy’s govern-ment will make enough budget concessions to satisfy the European Commission. Meanwhile, the cable jumped as the EU court aide hinted at leaving open option to revoke Article 50 unilaterally. Strong UK PMI construction and euro zone PPI data also help to lift sentiment surrounding the European currencies and add to the selling pressure on the buck. A more notable bearish driver for the dollar is further fall in Treasury yields. The 10-year yields broke below the 3.00% figure, down to three-month lows. Even more alarming is the fact that the spread between the 3-year note and the 5-year note have inverted for the first time since 2007, which is a sign of a recession in the US. This fac-tor should be closely followed down the road as further bearish signals from this front could derail Fed’s tight-ening plan and make the greenback break the ongoing bullish trend.
NSE:DOLLAR
by HelenRush
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GBPUSD: upside potential is limited After a meeting between Donald Trump and Chinese leader Xi Jinping at the Group of 20 summit, the two lead-ers reached a 90-day cease-fire in their trade dispute. Global investors are cheering the breakthrough that as-sumes that the US will hold off on his plan to raise tariffs on $200 billion in Chinese goods early next year. Against this backdrop, high-yield currencies resumed their ascent against the dollar, including the British pound. Cable is testing the 1.28 barrier on Monday, trying to get out of a bearish channel after four weeks of losses. However, despite the current recovery, the general upside potential in the GBPUSD pair looks limited. The UK Parliament will vote on Brexit deal on December 11. If the Prime Minister fails to win this vote, the op-position Labour Party would call a no-confidence vote. If May’s government survives a vote of no confidence, Labour could launch a campaign for a second referendum on remaining in the European Union. In other words, there are still significant political risks in the context of the ‘divorce process’ that will likely prevent the GBP bulls from more aggressive steps at least until the vote next week. Technically, the upside potential is limited either – as long as the cable trades below the 1.30 barrier, the down-side risks persist, even if the risk-on sentiment remains and the greenback continues to trade on the defensive.
by HelenRush
Brent remains on the defensive After a brief relief, crude oil prices extend loses Friday. Brent keeps bleeding for an eights week in a row as demand-supply concerns still persist in the market ahead of the crucial OPEC+ meeting due next week. The prices failed to regain the $60 threshold and turned negative on the day, still threatening long-term lows below $58. Over the weekend, the G20 Summit will take place in Argentina. Oil traders will focus on the widely expected dialog between the Russian and Saudi Arabia’s leaders in the context of potential production cuts. Should the presidents agree on the strategic issues, Brent will breathe a sigh of relief on rising chances for resuming quo-tas by the OPEC+ group. However, some other producers could be reluctant to limit output unless prices de-cline further dramatically. This uncertainty will prevail in the markets in the days to come, which should cap the recovery potential. And the fact that buyers refrain from opening long positions, confirms the instability and discomfort in the oil market. Brent will likely finish this week on the defensive, with the downside risks are prevailing, while the bullish poten-tial is very sluggish despite the oversold conditions. Once below $59, Brent could retest October 2017 lows.
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by HelenRush
Dollar digests Powell’s ‘dovish’ message The greenback continues to bleed nearly across the board, digesting the unexpectedly “dovish” tone from Pow-ell. The Fed Governor stated that rates were just below neutral range and didn’t mention a future 'gradual path of rate hikes for next year. Such rhetoric made traders worry about the potential pausing hikes in 2019. As a result, the dollar came under aggressive selling pressure which has partially abated in mid-morning trading on Thurs-day. The message from Powell implies that the buck could lose a strong bullish driver – the monetary policy diver-gence. At the same time, a more measured approach by the Federal Reserve bodes well for riskier assets. But in the short term only. By changing its tone, the Fed admits that the global economy is really cooling and a more substantial slowdown could be in the cards. In this environment, other major central banks may not find solid grounds for hiking rates as well. So, in the longer term, a more cautious stance by the US regulator won’t have a dramatic impact on the buck. For now, USD will likely remain under some pressure until the dust settles. By the way, negative Brexit devel-opments could help the dollar to recover. After the recent rally, cable clipped below 1.28 as sterling failed to keep the upside momentum ahead of meaningful vote. Further selling pressure from this front may ease the negative sentiment surrounding the greenback.
NSE:DOLLAR
by HelenRush
Euro could revisit 2018 lows After yesterday’s decline, EURUSD tried to stage a recovery but failed to attract buyers and resumed the downside move even as the dollar demand seems to be losing steam following the recent rally. The pair was rejected from the 1.13 handle and refreshed two-week lows below 1.1270. Despite the talks of Trump’s auto tariffs were denied today, the speculations were enough to fuel concerns about escalation of EU-US trade issues. Anyway, Italy remains the key bearish factor for the single currency as, according to the European officials, Italy’s budget deficit target must be closer to 2% for the EU to consider approval of the plan, and a cut of 0.2% is not enough to prevent opening the so-called EDP measures against Italy. Should the threat of negative developments on this front rise further, the euro could revisit this year’s lows mar-ginally above the 1.12 barrier. In this context, traders will closely monitor bond yields dynamics in the region. Another risk factor for the EURUSD pair is the potential USD rally. Trump’s hostile rhetoric coupled with poten-tially strong US GDP data and falling oil prices could fuel the greenback demand across the board. In the short term, Fed Powell’s testament will be in focus. A neutral or cautious tone could put the dollar under some pres-sure and cap the selling pressure on the euro.
by HelenRush
Dollar could receive further boost The greenback continues its ascent on Tuesday, with the major currencies are on the defensive ahead of this week’s G 20 Summit in Argentina. The pound is broadly lower as Brexit deal hopes continue to fade. GBPUSD slipped to mid-November lows around 1.2733, which helps to lift the buck. Interestingly, the EURUSD pair is also edging lower even as the Italian government has signaled that the country could adjust the deficit target from 2.4% to 2.2%. The price is threatening the 1.13 figure as traders ignore the potentially positive developments in the Italy’s drama. Such a behavior shows that investors are focused on the general dollar tone in the context of risk sentiment. In other words, traders prefer to buy USD ahead of the cru-cial Summit in Argentina, where trade and oil prices will likely be in focus. Another potential source of further dollar strength are the upcoming comments by the Fed officials. Investors now doubt that the Federal Reserve will continue its tightening path in accordance with previously announced plans. So fresh statements could dispel those doubts if the politicians confirm the outlined plan. In this regard, the greenback could strengthen further. So, EURUSD may lose the 1.13 handle, while the pound could chal-lenge the 1.27 support for the first time since late-October.
by HelenRush
EURUSD: too early to call a bottom The euro recovery is gaining traction on Monday after a steep decline late last week. EURUSD is extending gains above 1.13 but lacks momentum to challenge the 1.14 handle so far. The local demand growth is due to some positive developments in Italy. In particular, Italy's deputy prime minister Luigi Di Maio hinted at a possible budget deficit reduction. As being reported, the country’s government is discussing reducing the budget deficit to 2.0% - 2.1% from the current goal set at 2.4%. The officials will likely meet later today to discuss the reduction. In this context, the single currency could receive a relief should the government really decide to make concessions to the EU. In a wider picture however the euro’s attractiveness is still at risk against the backdrop of increasing signs of slowing growth in the region. This in turn may weaken the prospects of rising rates by the ECB in 2019. As such, it’s still too early to call a bottom and the downside risks still persist for the euro. The upcoming ECB President Mario Draghi's testimony before the European Parliament Economic and Monetary Affairs Committee will be the key event for the currency today. Any signs of “dovishness” on the economic or political developments in the region could undermine the current recovery. Technically, the pair needs to stay afloat above the 1.13 threshold which is the major pivotal point for EURUSD in the short term.
by HelenRush
Oil needs signals from OPEC Crude oil prices resumed the decline after some shallow recovery attempts earlier this week. On Friday, Brent has challenged the $62 support and slipped to fresh February lows around $61.80. The selling pressure has eased a bit since then but downside risks remain as the barrel struggles to get back above $62. The market has shifted focus to the upcoming OPEC+ meeting in early December. But after the Saudis an-nounces a possible production cut by 1.4 m barrels, there are no any further signals from the exporters. This silence makes oil traders nervous, and the uncertainty ahead of a critical meeting fuels further profit taking, even at the current low levels as market participants tend to reduce exposure to oil risks. Relentless rise in US shale activity adds to the negative pressure on prices. In addition, Brent is affected by risk aversion that prevails in the global financial markets against the backdrop of US-China trade war and signs of slowing global growth. In this context, the market will closely follow the incoming economic data from China and monitor the dialog between Washington and Beijing. In current circumstances, Brent will hardly be able to stage a consistent corrective rebound without some sup-porting factors. First of all, the market will be waiting for positive signals from OPEC. A better risk sentiment could also help. Otherwise, prices could target the $60 handle in the days ahead.
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by HelenRush
USDJPY: the path of least resistance remains to the downside Unstable investor sentiment prevents the USDJPY pair from a more robust recovery. The financial markets fail to show a steady rise due to a number of risk factors, from US-China trade war to Brexit and global growth. Against this backdrop, safe haven demand prevails and helps the Japanese yen to stay afloat even as the Bank of Japan continues to adhere to its ultra-loose monetary policy. Another hurdle for the greenback is the growing market fear of a pause on rate hike cycle by the Federal Reserve. In this context, the December Fed meeting will be the key event for the pair. Despite the lingering doubts, the central bank will likely hike for the fourth time this year. But much will depend on the Powell’s tone, as a cautious or even somehow “dovish” rhetoric could dump the dollar across the board. USDJPY struggles to stay above the 113.00 hurdle this week. The dollar needs some impetus, including higher Treasury yields, to make a clear break above this level. Otherwise, the risk of a slide to 112.30 will grow. The pair will turn bearish on a break below the 112.00 support. As the risk aversion still prevails, the path of least resistance remains to the downside.
by HelenRush
EURUSD: bears remain in control The positive sentiment in risk appetite underpins the euro on Wednesday. Yesterday, EURUSD was rejected from daily highs still below 1.15 and slipped under 1.1360. Now, the pair is trading positive on the day but still struggles to regain the 1.14 figure which confirms a cautious tone amid the Italy’s budget woes. The reports that Italy may make cuts to the amounts on citizens' income have supported the single currency ear-lier in the day. But the European Commission will anyway disapprove of the revised budget. So the risks from this front persist. Moreover, the dollar looks stable after the recent rally, which caps the euro’s upside potential as well. Meanwhile, Italy's statistics bureau cut its 2018 GDP growth forecast to 1.1% from 1.4%. It’s not sur-prising but doesn’t bode well for the European currency either. In the short-term, the bearish risks for the EURUSD pair persist. Further Italy-German yields spread widening could fuel another sell-off in the euro. In a wider picture, traders will likely continue to sell the currency on rallies until the Italian dust settles, and it may take a long time. As long as the pair is trading below 1.15, the bears will remain in control.
by HelenRush
Gold benefits from weaker dollar The yellow metal continues its recovery on Tuesday amid a widespread risk aversion, declining yields and weaker dollar. Gold prices are regaining ground for a sixth day in a row but still fail to make a decisive break above the $1,225 immediate resistance. Investors refrain from risk taking against the backdrop of ongoing Brexit concerns, Italy’s budget issues, un-certainty over the trade war, and the global growth concerns. Additionally, the greenback is on the back-foot after some dovish comments by Fed officials. These two factors support the metal’s attractiveness for buyers. However, the current pressure on the buck is not enough to fuel a more sustainable ascent in gold prices. Inves-tors are still cautious after a prolonged drop that lasted for over six months. Gold bulls need more impetus and drivers to push the prices substantially higher from here. As such, the precious metal will continue to closely watch the signals from dollar and from the Fed, while the incoming US economic data will be assessed by traders even more thoroughly after the recent signals from the Federal Reserve. The bullion needs to get back above the $1,230 threshold in order to pave the way to further ascent.
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by HelenRush
Fed clips dollar’s wings At the start of a new week, the greenback is trading under a mild selling pressure after a steep decline on Friday. The American currency feels uncomfortable after the Fed officials expressed concerns about global growth. Investors took the recent comments as a signal that the central bank could slow down the process of monetary policy normalization, which discouraged dollar bulls. Against this backdrop, the December rate hike expectations have declined from over 90% to just 73%, while the 2019 rate hike outlook has shifted as well. So far, the reemerged trade war fears cap the buck’s downside po-tential, but should the Federal Reserve officials confirm their softer stance on policy tightening due to global risks, the trade factor won’t be able to support the USD as its safe-haven status could weaken. In this context, traders will closely follow comments by New York Fed President John Williams later today. As Williams is considered a centriston monetary policy, his statement could both support and pressure the buck, depending on his position. In a wider picture, the dollar trading ranges could narrow this week due to a Thanksgiving day effect in FX mar-kets, followed by Black Friday. Amid the heightened uncertainty over the Fed’s position, the path of least re-sistance for the dollar is on the downside.
NSE:DOLLAR
by HelenRush
Brent: too early to call a bottom? Crude oil prices continue to recover gradually, with Brent has settled above the $67 figure on Friday. Today is the third day of gains in a row, but the bullish impetus still looks too fragile and cautious. The price seems to have found support below $65 earlier this week, however the downside risks are still there and it looks like it’s too early to call a bottom. Brent has shifted to a recovery mode due to a number of verbal interventions by OPEC+ members who rushed to promise production cuts to stem the sell-off in commodities. The market will be expecting further bullish comments from the cartel ahead of the summit that will take place in three weeks in Vienna. It looks like the question now is how much output will be cut and for how long. Should the exporters signal that the decline is going to be less than 1.4-1.5 m barrels per day, traders will be disappointed as the US shale production continues to set new records and US sanctions on Iran turned out to be not as tight as was expected. To stage a robust rally from the current levels, crude oil prices need to see some major production disruptions, bullish weekly EIA data, or a softer Trump’s stance on OPEC and prices. As none of this is expected for now, Brent will proceed with its modest corrective rebound at best, with bearish risks remain.
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by HelenRush
Brexit progress drives USD down The greenback remains on the defensive for a third day in a row on Thursday. The key reason behind its local weakness is a meaningful progress on Brexit as Theresa May got cabinet approval for her draft agreement which fuelled sterling and euro rally. By the way, the buck is also lower against the Japanese yen even as inves-tor sentiment in the global financial markets is improving gradually on Thursday. USDJPY failed to make a clear break above the 114.00 threshold earlier this week and remains under a limited selling pressure, holding above 113.00. On Wednesday, the pair was dragged down by risk aversion and lower US 10-year Treasury yields which declined to the lowest since late-October. As the sentiment improves, the price could resume the upside move down the road. But the key obstacle for dollar bulls is Brexit-fuelled pound optimism. So any negative headline from London or Brussels could spark a bearish correction in the cable, which in turn will support the greenback. In the short term, traders will focus on the US retail sales report. Market expectations are for a recovery in the retail sales excluding cars by 0.5% versus the previous result of -0.1%. If so, the USD bulls will regain control as strong numbers will cement the December rate hike expectations.
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by HelenRush
EURUSD remains vulnerable It looks like the dollar demand is back after yesterday’s correction, with EURUSD is under a bearish pressure again, while the pound seems to be losing its Brexit-related enthusiasm. Despite the fresh headlines from Lon-don could yet fuel another sterling rally, a wider picture shows that the greenback remains strong, mainly due to monetary policy divergence. The euro rallied against the USD on Tuesday but failed to regain the 1.13 figure which confirms that the Europe-an currency stays rather unattractive for buyers because of budget issues in Italy and more signs of slowing growth in the euro area. As such, the Q3 German GDP contracted 0.2% vs. -0.1% expected. That's the weakest quarterly growth since Q1 2013 and another argument against a rate hike by the ECB. Another bearish factor for the European currency is the prevailing risk aversion in the global financial markets. There are still a number of risks including trade wars, Italy, Brexit, slowing global growth and falling oil prices. The latter is the strongest drag on risk sentiment right now. So should crude oil prices fail to shift to a recovery mode any time soon, the euro could get under additional pressure. Technically, EURUSD needs to firmly regain the 1.13 threshold in order not to challenge the 1.12 support in the days to come.
by HelenRush
Oil prices depressed by dollar rally Crude oil prices lick wounds after another aggressive sell-off. Brent slipped below the $69 figure for the first time since April and struggles to get back above $70 on Tuesday as concerns over a weaker global demand still prevail in the market. The recent decline in prices was fuelled by dollar rally. The American currency is on the rise due to monetary policy divergence coupled with the issues on Brexit and Italy’s budget. And the prevailing risk aversion only adds to the selling pressure in commodities. On Monday, Saudi Arabia announced crude oil production cut by 500K barrels per day starting from December. But this was not enough to fuel a sustainable rally as traders continue to focus on demand prospects amid signs of slowing global growth. Technically, Brent needs to get back above the $70 threshold in order to see a weaker selling pressure. To do this, the market needs a more sustainable improvement in risk sentiment along with a healthy USD correction. The immediate risk event for the market is API report due later today. Further increase in crude oil stockpiles will limit the recovery potential.
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by HelenRush
Further EURUSD weakness may be in the cards The euro continues to grind lower on Monday with the EURUSD pair has lost the 1.30 handle for the first time since mid-2017 against the backdrop of a stronger USD index that hit a 17-month high earlier in the day. The buck is widely supported by investor expectations on further tightening by the Federal Reserve. By the way, the December rate hike has been priced in already, and the current market optimism is more based on expectations of at least three more hikes in 2019. And the solid economic fundamentals from the US only support this view. Apart from strong dollar, the euro is under pressure amid the continued Italy’s budget woes. Tomorrow the deadline expires that the EU officials set for the country to present a revised budget plan. But as we know, Rome has refused to change its initial plan, so there are further risks from this front for the European currency. Technically, the initial target for the euro bulls now comes at 1.13. Meanwhile, on the downside, the pair may extend losses to 1.12 and below should the dollar strength persist in the nearest future.
by HelenRush
Crude oil market lays hopes on OPEC Crude oil market has mostly ignored the speculations on a possible OPEC output cut in 2019. Brent has expended its bearish path to seven-month lows marginally above the $70 crucial handle on Friday as concerns over global oversupply weight. The dollar continued its advance after the hawkish FOMC statement, which adds to the selling pressure. As the US sanctions on Iran turned out less aggressive than investors expected, the worries about oversupply reemerged, in addition to risks of a weaker demand amid the increasing signs that world economic growth is slowing. Besides, the US and Russia are pumping record volumes. But Brent still has a chance to refrain from a more aggressive plunge as OPEC'sJoint MinisterialMonitoring Committee will meet this weekend in AbuDhabi, where ministers could discuss and recommend a cut in production, citing the mentioned risks. In the short-term, however, Brent will likely remain under pressure, especially if today’s Baker Hughes report points to another rise in rig counts in the US.
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by HelenRush
Gold sell-off could intensify after FOMC The yellow metal is suffering losses for a fifth day in a row after an impressive rally that took place last Thursday. Today, gold prices have eroded the $1,222 handle and now threaten to challenge the $1,220 support level. The dollar regains strength following a bearish knee-jerk reaction to the midterm election outcome, which increases the downside risks for the bullion. The market focus has shifted to the FOMC meeting that concludes later today. The Federal Reserve is expected to take a positive stance on further monetary tightening, citing healthy economic fundamentals in the US. The central bank will also likely confirm its commitment to another rate hike in December. Such a scenario will be USD-positive and could accelerate its recovery against major rivals. If so, gold prices could grind even lower amid the combination of a stronger greenback and a relatively robust risk appetite. However, the downside potential looks limited at this stage as the Fed will hardly be able to spark a sustainable rally in the buck.
TVC:GOLD
by HelenRush