Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Turmoil in the currency markets as US builds up crude oil stocks - foretell Iran strike ?

Currencies / Forex Trading Jan 24, 2007 - 08:46 PM GMT

By: Ashraf_Laidi

Currencies Light sweet crude is down 20 cents at $54.80 per barrel, after Tuesday's $2.48 jump to $55.04 on reports that the US Dept of Energy will purchase 100K barrels of oil per day starting next spring. While the decision is part of the Bush Administration's latest commitment to reduce US dependency on imported oil, the aggressive approach on beefing up SPR may reflect heightened possibility of a US military strike against Iran as early as March or April, at a time when US navy ships are piling up in the Persian Gulf. Yesterday, markets were filled with chatter of a Kuwait-based newspaper article reporting that the US will launch a military strike on Iran before April 2007, citing "reliable sources".

According to the article, the strikes will be launched from US ships with Patriot missiles guarding all oil-producing countries in the region. The attacks would be planned in April, the last month of British PM Blair in office. The immediate result of such an attack is a protracted run up in oil prices, which could reach the $70 per barrel mark in less than a week.


The recent pickup in FX market volatility to oil price swings reflects the role of energy prices in recalibrating the FX equation. A renewed decline in oil bolsters expectations of a US consumer-led stability to act as a stabilizer to housing's downside risks. The 14% decline in prices so far this year has considerably diminished chances of a March Fed cut and manifested itself across European and Asian currencies. The role of oil's rebound has been such that it took center stage in FX markets, shadowing a string of positive economic data from the Eurozone and the UK. Aside from freeing US consumers' wallets, falling oil prices have reduced the Sep-Nov trade deficit by over 17%, which is likely to contribute as much as 0.7% to GDP.

Kuwait concerned with dollar performance
Less than 1 month after the United Arab Emirates announced it will reduce the amount of dollars in its currency reserve composition, Kuwait, the 3rd Arab oil producer said it may abandon the dinar's peg against the US dollar in favor of a basket of currencies to cushion the impact of a weakening US dollar Kuwait's finance minister Bader al-Humaidhi said in Davos, Switzerland today ``The dollar fell a lot against the euro last year, but if we'd been linked to a basket we wouldn't have suffered'. Kuwait, along with the 5 Gulf Arab monarchies has pegged its currency to the dollar ahead of a planned single currency planned in 2010.

Today's weekly US petroleum inventory figures (10:30 am) are expected to show a an increase of 1.3 million barrels in crude oil, and a drop of 700K barrels in distillate stockpiles (heating oil and diesel).

Cable plunges on dovish minutes
Sterling dropped more than 1 cent to $1.97 after the minutes of this month's Bank of England interest rate decision revealed a 5-4 vote, in favor of the surprising 25-bp rate hike. Markets had expected no more than 2 dissenters at the decision, especially when CPI registered a 3.0% y/y growth, well above the central bank's 2.0% target. MPC members Bean, Blanchflower, Lomax, and Tucker were the dissenting voters, stating that inflation would fall during 2007. The majority said that they did not see risks to inflation falling quickly, and saw little chances of a slowdown from the rate hike. Sterling had already been under pressure ahead of the minutes after a BoE Governor Mervyn King said in a speech late yesterday that the Bank maintained its view that inflation would fall back in H2, possibly quite sharply.

The minutes shadowed the stronger than expected Q4 GDP figures showing a rise of 0.8% q/q and 3.0% y/y, the highest since Q2 2004. It remains unclear whether the vocal doves at the MPC will prevent a rate hike next month.

Cable stabilizes at the 61.8% retracement of the 1.9591-1.9914 move at 1.9710. A break below the 1.97 figure is expected to stabilize at 1.9680. Key foundation stands at 1.9650. Traders must carefully watch tomorrow's IFO survey from Germany and US existing home sales for further action in cable. Upside seen capped at 1.9730, with further gains encountering pressure at 1.9760.

Aussie slumps on weak CPI
AUDUSD dropped more than a full cent to 0.7810 from 0.7935 after Australia's headline CPI slowed to 0.1% m/m in December and 3.3% y/y, against expectations of a 0.2% m/m and 3.6% y/y. Falling prices of commodities were largely attributed to the soft data. The figures slashed expectations of a February RBA rate hike from as much as 80% to 40%.

We expect AUDUSD to stabilize near the 0.7805 support ahead of this morning's oil inventory data from the US, which could fuel the pair back towards the 0.7820s. Upside capped at 0.7840. The daily MACD suggest renewed losses towards the 0.78 figure, but support seen standing firm at 0.7770.

Euro seeks 1.2950 support
The latest drop in EURUSD is expected to stabilize at the 1.2950 support as markets stay aside ahead of the US oil inventory data, which could potentially show smaller than expected builds resulting from the recent drop in temperatures. Nonetheless, the daily MACD suggests further declines to as low as 1.2920.

Buying support should emerge near the figure ahead of tomorrow's IFO survey, which is expected to hit a fresh 15-year high at 109 in January from 108.7. Recall that the figure had been a source of sharp euro gains in the last two months, which makes a retreat very possible.

Upside capped at 1.3050, followed by 1.3080, which is the 50% retracement of the said move.

USDJPY ends little changed after wild ride
A brief exodus from carry trades following the 1 cent plunge in the Aussie triggered a 100 pip drop in USDJPY to 120.67, but renewed pressure on European FX and a brief retreat in oil boosted the USD back above 121.20 and onto 121.60. Markets may be ready to fuel fresh gains in the pair if Friday's CPI release (due Thursday evening) shows another 0.2% y/y increase in January. The upward bias in the pair remains as such that we expect 122 to be a matter of time. Interim resistance stands at 121.80, followed by 122.20. Longer-term resistance stands at 122.60. Renewed losses seen stabilizing at 121.20.

By Ashraf Laidi
CMC Markets NA

Ashraf Laidi is the Chief FX Analyst at CMC Markets NA. This publication is intended to be used for information purposes only and does not constitute investment advice. CMC Markets (US) LLC is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission and is a member of the National Futures Association.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules