Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Currency Forecasts - Effects of Supplying Oil and Military Troops

Currencies / Forecasts & Technical Analysis Jan 17, 2007 - 09:24 PM GMT

By: Ashraf_Laidi


The 17% decline in oil prices so far this year has recalibrated the FX equation in so far as bolstering expectations of a US consumer-led stability to act as a stabilizer to housing's downside risks. This 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 Q4 GDP.

Now that record high winter temperatures may be behind of us, we can expect prices to remain stable as long as the OPEC members of the Arabian Gulf succeed in blocking additional supply cuts, beyond the already implemented 1.2 million barrels per day and 500K bpd scheduled for next month. The most likely outcome is for OPEC to assess where prices would reach by February 1st and examine the market impact of the scheduled 500k cut. But there stands the risk that prices may slump towards the mid $40s before February 1st, especially given the larger than expected builds in US supplies.

Increased US forces in Iraq Saudi Peace of Mind from Iran Threat Cheaper Saudi Oil
It is becoming established that the US Allies of the Arabian Gulf--especially Saudi Arabia--are heeding the calls of Washington, by extending the recent decline in oil prices in order to prevent a US economic hard landing. A US hard landing would force the Federal Reserve into cutting interest rates at a time when combating inflation remains its priority. In return, the increase of US forces in Iraq preempts Iran-backed insurgency from spilling over to Saudi Arabia. A Saudi Arabian official had already expressed his worry last week from the Iran threat in Iraq, demanding US State Secretary to clarify the US position on how long it plans to retain troops in Iraq. This oil diplomacy has managed to filter through financial markets, with Washington using key allies in preventing higher energy prices from exacerbating the housing slowdown.

Industrial production seen offsetting TICS
Wednesday's US data will start off with the December PPI, expected to slump to 0.6% from 2.0% and the core PPI to sink back to 0.1% from 1.3%. We do not expect these low figures to be dollar negative. Similarly, we expect the TICS report to show a sharp decline in net capital inflows to as low as $30 billion November following $62.2 bln in October mainly as a result of the dollar's 4.0% November slump. The data may likely destabilize the US currency, but industrial production could provide renewed stability. Any figure of more than 0.1% is expected to be positive. We expect industrial production to rise by as high as 0.3% and capacity utilization to 81.9% from 81.7%. An optimistic account of the Fed's beige book should also give additional late session boost to the US dollar, with the immediate positives seen to be stabilization in real estate, brisk holiday sales and firm pricing power.

EURUSD to target 1.2815 before end of week
The relative lack of data from the Eurozone will render the EURUSD pair largely dependent on the flood of US economic reports and Fed Chairman Bernanke's Congressional testimony on tax issues, none of which are expected to hinder the dollar's retreat. Any interim gains towards the 1.2970s will likely encounter solid resistance, which should turn into aggressive dollar buying, targeting the 100-day moving average of 1.287. Stops are seen breaking the bids into 1.2820.

Spot Euro USD

AUDUSD targets 0.7760
Despite its 6.25% yield advantage and chatter of an additional RBA rate hike, we expect AUDUSD to gradually retreat back towards the 0.78 figure, resuming where it left off last Friday. A breach of the key 0.78 support is highly possible by the array of US data and scheduled speeches from the Federal Reserve. A break of the figue is seen prolonging the slide towards the 0.7760s.


Gold eyes $617
We expect gold to have already topped out for the week, with the downside as the only likely path from here. Initial target at $620 should give way to the 200 day MA, and expect $615 before end of week.

Spot Gold

Despite surging UK inflation and expectations of a February rate hike by the Bank of England, we expect a negative week for GBPUSD, with the immediate target standing at $1.9570, followed by 1.9530. Upside seen capped at 1.9720.

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 - 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