Loonieviews 27May16


Loonie offered as oil consolidates recent gains

Michael O’Neill

FX Consultant / IFXA Ltd

Canada

  • US dollar cautiously bid ahead of Yellen speech
  • Oil prices approaching stiff resistance
  • BoC statement may keep USDCAD rangebound

By Michael O’Neill

The US dollar is ending the week with a bit of a bid ahead of Federal Reserve chair Janet Yellen’s afternoon speech which is hoped to validate the hawkish rhetoric seen from a number of Fed speakers of late.

FX activity is extra quiet as those who can make an early escape to enjoy the Memorial Day weekend.

How neutral was the Bank of Canada?
By most accounts, the Bank of Canada statement on Wednesday was neutral. The Canadian dollar squeaked out some gains as there was a faction who were disappointed that the statement wasn’t on the dovish side.

In fact, an argument can be made that the BoC was indeed “dovish”.

GDP, for instance, has apparently slipped into the negative as the Alberta wildfires

hit the country’s oil-producing region. Photo: iStock

The statement didn’t mention anything about the impact of the big decline in exports in February and March even though governor Stephen Poloz has repeatedly said that Canada’s economic recovery from the oil price collapse hinges on non-energy exports.

In the April Monetary Policy Report, the BoC downgraded Q2 economic growth to a mere 1%. In Wednesday’s statement the Bank said that the impact from the Alberta wildfires would cut 1¼ points off of Q2 GDP, which puts it into negative territory.

The BoC statement was vague and appeared to be a deliberate attempt to skirt the negative issues overhanging the domestic economy, perhaps hoping that the fiscal initiatives announced in the March budget will lead to economic improvements by the next meeting on July 13. The statement may have read “neutral” but gear-shift is heading toward “reverse”

Canadian trade balance and exports:

Source: Statistics Canada

Oil rally may pause

USDCAD plunged from 1.3188 to 1.2912 when WTI spiked to $50.21/barrel from $48.62/b and then collapsed just as quickly as WTI retreated. Oil prices found support from the May 15 Goldman Sachs report that said the market has shifted from ““nearing storage saturation to being in deficit much earlier than we expected”.

On Wednesday, the EIA crude stocks change data reported a draw-down of 4.2 million barrels which led to the sharp but short-lived WTI rally.

The WTI technicals are showing signs of fatigue with RSI indicators showing overbought despite the short-term uptrend remaining intact and prices well above the uptrend line which comes into play at $45.10/b.

In addition, there is strong resistance in the $50-$51.00/b area which should prove difficult to overcome in the absence of a compelling macro story. Intraday, WTI needs to decisively break below the $48.50/b area to suggest that a short-term top is in place and lead to $45-$50/b consolidation.

USOil daily with RSI:

Source: Saxo Bank

USDCAD consolidation ahead

This week’s USDCAD decline from the 1.3187 peak appears to have come to an end with this morning’s break of 1.3050 which will be confirmed on a move above 1.3090. The Canadian dollar negatives are starting to stack up, beginning with a coyly neutral Bank of Canada statement, the prospect of an oil price decline (or at least the rally stalling out), and steadily improving US economic data.

The latter is behind the slew of hawkish Fed speakers suggesting a rate hike is possible in June or July. That view may be set in stone if Yellen’s Friday speech echoes the hawkish sentiment. At the same time, USDCAD is unlikely to shoot for the moon due to strong resistance in the 1.32-1.3300 area.

Such being the case, USDCAD may trade within a 1.2900-1.3200 range next week.

USDCAD hourly with expected trading range shown:

Create your own charts with Saxo Trader click here to learn more.

Source: Saxo Bank


The week ahead

The past couple of weeks have been close to a "famine” in the context of major, market-moving data releases. For the coming week, welcome to the feast.

(Unfortunately, the feast won’t begin on Monday due to holidays in the UK and America).

Tuesday is a different story as Australia and New Zealand lead off with some second-tier data ahead of the main event, Eurozone CPI and a host of secondary regional data. The US weighs in with PCE data for April and the Chicago PMI. The icing on the cake is the month-end portfolio rebalancing flows which point to US dollar selling.

Wednesday, China releases Caixin PMI data. while Australian GDP information is also due. There are a lot of UK data which may get more attention as long as the Brexit polls continue to show the Remain side with a convincing lead. The key US data release of the day will be ISM Manufacturing PMI

Thursday begins with Australia Trade data which will be overshadowed by the looming European Central Bank interest rate decision and press conference.

On Friday, US nonfarm payrolls will be the star of the show and as usual, FX trading will be muted ahead of the release.

The week that was

The bar was set pretty low in terms of FX trading expectations for this week and for the most part, those expectations were met.

Monday started with the US dollar offered against Aussie and kiwi, a theme that didn’t last past early morning in Europe. USDJPY sank on news that Japan posted the largest trade surplus in six years and it continued to be sold during the New York session.

Eurozone PMI data were mixed and EURUSD traded choppily but managed to close almost where it started the week.

On Tuesday, Asia markets fixated on the Japanese finance minister’s apparent definition of a “one-way move in USDJPY; five big figures in two days.

That helped USDJPY recoup all of Monday’s losses while AUDUSD and NZDUSD were sold and oil prices started to rise. Rising Fed rate hike expectations gave the greenback some backbone supported by strong Housing data.

EURUSD retreated from 1.1200 to 1.1140 by the close in New York.

Wednesday saw the commodity currencies find a bid in Asia due to higher oil prices and rising equity markets. A better-than-expected New Zealand trade report provided additional support for the kiwi.

European markets followed the Asian lead and the US dollar was generally soft; USDJPY remained bid. The weak dollar tone continued throughout the New York session. The EIA report of a 4.2m barrel drawdown in crude stocks ignited another bout of oil strength and WTI was soon flirting with $50/barrel. Rising oil prices and a benign Bank of Canada statement sank USDCAD.

Thursday’s Asia session started where the New York session ended; the US dollar was offered, except against NZDUSD. Bearish news on milk prices from Fonterra put kiwi under pressure. Commodity currencies were in demand in Europe with Brent oil making a new six-month high.

In Europe, EURUSD drifted in a narrow range as traders awaited Fed chair Janet Yellen’s speech on Friday. In New York, WTI broke through $50/barrel to reach $50.21, but retreated almost immediately. US Durable Goods looked good but it was mostly due to aircraft orders while the other components were weak. That news took the wind out of the dollar’s sails.

Friday’s FX trading was on the subdued side of the equation due to looming long weekends in the UK and the US and Janet Yellen’s afternoon speech.

It’s not even a policy speech, but USD traders will be combing Fed chair Janet Yellen’s words for any sign of hawkish or dovish leanings this evening. Photo: Federal Reserve/Flickr.com

— Edited by Michael McKenna

Michael O’Neill is an FX consultant at IFXA Ltd.

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Looking at the Loonie, cross-eyed 17May16


Looking at the loonie, cross-eyed

Michael O’Neill

FX Consultant / IFXA Ltd

Canada

  • US dollar gains on CPI
  • Firm oil prices underpin Canadian dollar
  • Canadian dollar supported by cross currency demand

A bit of rise and shine in oil has helped keep the Canadian dollar solid. Photo: iStock

By Michael O’Neill

The Canadian dollar has been trapped within a 1.2500-1.3000 trading band since April 8 with only a brief and minor foray outside that range and today’s US data didn’t do anything to change that. The major Canadian dollar positives — neutral central bank and rising oil prices — are fairly balanced against the negatives of mixed to weak economic outlook and the CAD/US interest-rate outlook.

That leaves the Canadian dollar technical outlook against the majors to help provide direction.

EURCAD: EURCAD has been in a ragged downtrend since January which remains intact while prices remain below the 1.4860-70 area. The intraday uptrend from the April low of 1.4140 ended with the move below the 1.4680-1.400 zone. Since then, EURCAD has consolidated within a 1.4540-1.4670 range. A break below 1.4540 would target 1.4400 and then 1.4200. A move above 1.4660 would lead back to 1.4800.

Direction: modestly bearish-conviction low.

EURCAD 4-hour chart

Source: Saxo Bank

GBPCAD: GBPCAD snapped a long-term uptrend that began in April 2013 with the move below 1.9450 in February. The decline was steep and found a floor in the 1.8000-50 area. The subsequent GBPCAD rally remains intact while trading above 1.8530. It is currently bumping up against resistance in the 1.8750-75 area which if broken, will extend gains to 1.9060. A move below 1.8630 suggests additional 1.8500-1.8775 consolidation.

Direction: bullish-conviction low due to Brexit influences

GBPCAD 4-hour chart

Source: Saxo Bank

CADJPY: CADJPY made a new 2016 high of 88.80 on April 27 and then plunged to 82.35 by May 6, recouping nearly 60% of the entire 2016 range in about a week. The rally from 82.35 has stalled twice in the 85.20-50 area but while trading above the 84.10-30 zone, remains in an uptrend. A move above 85.50 targets 87.20 while a move below 83.70 suggests a return to 82.70

Direction: bullish-conviction low

CADJPY 4 hour-with Fibonacci retracement levels

Source: Saxo Bank

AUDCAD: AUDCAD has declined steadily since the middle of April and the downtrend remains intact while trading below the 0.9520-50 zone. The minor uptrend from the overnight low will be broken on a move through 0.9430, opening the door to a revisit with the May low of 0.9350 and then 0.9100. A break above 0.9550 would negate the downtrend and lead back to 0.9780.

Direction: bearish-conviction medium

AUDCAD 4-hour chart

Source: Saxo Bank

Cross Canada demand favours Canadian dollar

The short-term technical outlook on the major Canadian dollar crosses suggest that USDCAD gains arising from an increase in expectations of higher US interest rates will be tempered by Canadian dollar demand.

There are some fundamental reasons that support a modestly stronger Canadian dollar.

1) The Canadian dollar is benefiting from higher oil prices and a positive outlook for additional gains.

2) An improving US economy is generally good for the Canadian economy due to an increase in exports.

3) The benefits to the Canadian economy from the federal fiscal stimulus programs have not worked themselves into the current data.

It won’t be a one-way ride

A major impediment to additional Canadian dollar gains can be found in positioning. The latest Commitments of Traders report showed Canadian dollar long positions growing in contrast to the US dollar positioning increasing against the other majors.

Sure the data is a week old but it is still a valid guide. Arguably, a lot of these positions have been established on the back of the rising crude prices. The first sign that oil has found a top could send all these CAD bulls to the exit, at the same time, and that move would be nasty.

USDCAD and Oil -hourly chart

Source: Saxo Bank

— Edited by Martin O’Rourke

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FX noise distorts the direction 13May16


FX noise distorts the direction

Michael O’Neill

FX Consultant / IFXA Ltd

Canada

  • US Retail boosts US dollar-Michigan Sentiment keeps it that way
  • Expect minimal impact from next week’s Canada data
  • Despite the noise, US dollar direction is undecided

By Michael O’Neill

The USD is ending the week on a positive note and is bid across the board. The dollar’s demand started in Asia, continued in Europe and accelerated in New York supported by big gains in Retail Sales and Michigan Consumer Sentiment?

Strong Data, weak data, now strong data again.

US Retail Sales blew the consensus out of the water. The consumer is back! All hail the consumer! The US dollar soared as this data which has re-opened the door to a June rate hike back to where it was last Friday before a weak nonfarm report slammed it shut. The Michigan Consumer Sentiment index has opened the door a little wider.

And that is also the problem. FX traders have been jumping on and off the rate hike band-wagon like a fat man on a pogo stick. Sentiment shifts from bullish to bearish and today’s data has the bullish camp in the driver’s seat. Still there is no reason to believe that the pattern of strong data/weak data will change. There is still another employment report to come.

Today’s price action hasn’t done anything to break the FX majors out of their consolidation ranges. EURUSD is still within a 1.1200-1.1600 band, USDJPY (helped by intervention speculation) has bounced within a 105.50-112.00 band since mid-April and USDCAD is locked within a 1.2500-1.3000 range.

It is not much of a stretch to suggest that these ranges will remain intact until just ahead of the June FOMC meeting.

Dismissing Canadian data:

There is a lot of Canadian data to look forward to next week including Manufacturing Shipments, Retail Sales and CPI in addition to the quarterly Bank of Canada review on Monday. In normal times, this data would be closely scrutinized for clues as to the health of the economy and whether or not I would prompt action from the central bank. Alas, these are not normal times.

The federal stimulus program announced in the March budget is expected to add 0.5% to GDP in this fiscal year. The BoC noted that the stimulus program would have a positive effect on the economy, offsetting the negative effects from other domestic developments and global factors.

It has only been a month since that statement so it is unlikely that the next batch of Canadian data will have a material impact on the BoC’s outlook for the Canadian economy. If so, the impact of next week’s data should be minimal and fleeting.

WTI in driver’s seat

The Canadian dollar has been closely tracking WTI price movements all week and that is unlikely to change. The February uptrend remains intact while trading above $42.50 which is guarded by the intraday uptrend at $45.50. A break above resistance in the $47.00-20 area suggests further gains to $48.30-50. If that level goes, the $50.84-$51.00 becomes the next target. A move below $45.50, suggests additional $42.00/b-$47.00/b consolidation while a break below $42.00 puts $35.00 in play.

On the fundamental side, production increases combined with price cutting tactics by Iran may be met in kind by Saudi Arabia which will limit topside gains.

USDCAD and WTI (green line)

Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more

USDCAD technical outlook:

The short term outlook for USDCAD is bullish confirmed by Monday’s break of 1.2810 representing the downtrend line from January. The rally from the 1.2462 low stalled at 1.3000 and USDCAD has been consolidating above 1.2750 ever since.

A move above 1.3050 should extend gains to 1.3310 representing the 38.2% retracement level of the 2016 range.

Intraday, failure to break above the 1.3000-50 zone implies additional 1.2750-1.3050 consolidation.

USDCAD 4 hour with Fibonacci retracement levels.

Source: Saxo Bank

The week ahead:

There is nothing like a spate of holidays in Europe on a Monday to put a kind of a hush all over the FX world. Germany, France, Switzerland and Denmark are closed and there isn’t any major US data due.

Tuesday will be different. Asia will enjoy the RBA minutes and RBNZ inflation expectations. European traders will see a lot of UK data although Brexit issues have shunted data to the sidelines.

Wednesday’s release of the FOMC minutes will put the spot-light back on US data and the June 15 interest rate meeting.

Thursday, AUDUSD will be center-stage in Asia, with the employment report release. US data and the Fed’s William Dudley will garner attention in New York.

Friday, the BoJ minutes may stir the pot in Asia while European traders look at PPI data from Germany. The week ends with a slew of Canadian data ahead of a long weekend.

The week that was

This was expected to be a fairly quiet week in FX markets and for the most part it lived up to its advance billing.

Monday greeted Asia traders with weaker-than-expected China trade data, fall-out from the previous Friday’s US employment report, intervention threats by the Japanese Finance Minister and higher oil prices. European traders bought USDJPY in an otherwise quiet session. The US dollar closed the day in New York with a bid tone supported by a drop in oil prices and Fed speakers suggesting that a rate hike is possible in June.

Tuesday was a tad livelier than the previous day although the G10 price action was confined to inside the existing trading bands. USDJPY continued to make gains on repeated, but vague intervention warnings. Kiwi was under pressure ahead of the RBNZ’s Financial Stability Report while Aussie was the biggest gainer on the day.

Wednesday’s Asia session was described as “noisy”. It started with rising equities and a firm USDJPY. That changed. USDJPY dropped followed by AUDUSD, both for no apparent reason. NZDUSD rallied when the RBNZ’s FSR report delivered a less doveish message than expected. Oil prices were higher as well. In Europe, USDJPY recovered some losses, GBPUSD was offered and EURUSD traded sideways. Choppy range trading continued in New York. WTI prices rebounded on EIA data showing a sharp decline in US crude stocks which boosted the Canadian dollar.

Thursday was another quiet day in Asia. Traders turned a deaf ear to comments from the BoJ governor, Kuroda but not so in Europe. Traders there bought USDJPY. The Bank of England meeting ended with a unanimous decision to leave rates unchanged and a dire warning of the risks to the UK economy if the "Leave" side wins the Brexit referendum. New York reacted to weak Jobless Claims data and traders enjoyed a brief spike in volatility as the US dollar was sold. That move didn’t last and the US dollar finished the day with gains against 7 of the G10 currencies. USDCAD and USDNOK were modestly lower on a recovery in oil prices and GBPUSD was flat.

Friday, blow-out Retail Sales data powered an already bid US dollar to new heights

Kiwi under pressure. Photo: iStock

— Edited by Clemens Bomsdorf

Michael O’Neill an FX consultant at IFXA Ltd.

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FX markets get early start on dog days of summer 10May16


FX markets get early start on dog days of summer

Michael O’Neill

FX Consultant / IFXA Ltd

Canada

  • FX traders chasing their tails as broad currency ranges hold
  • Top-tier data void lasts until Friday’s US retail sales
  • Oil prices at risk of sliding if Saudi Arabia counters Iran’s price-cutting

Isn’t it too early for the sultry dog days of summer? Photo: iStock

By Michael O’Neill

The first two days of this week haven’t provided much direction to the markets, and that is unlikely to change until Friday’s US retail sales report. And the retail sales data on its own probably won’t be very insightful. Further oil price declines may get things going, especially if Saudi Arabia counters Iran’s price-cutting moves.

Dog days of summer — in May?

The calendar says May 10, not August 10, yet the big three in FX are trading like it is the depths of a summer heat-wave.

EURUSD is a prime example. This cross has been trapped within a trading band of 1.1350-1.1450 since Thursday, unperturbed by renewed Greek requests for debt concessions and mediocre economic data.

Even sterling volatility has decreased. The UK referendum is still 44 days away, but calm has returned to GBPUSD as it chops around in a 1.4370-1.4520 band. Data (strong or weak) is overshadowed by Brexit poll results, which continue to indicate that the UK’s vote on its future in Europe may be close.

USDJPY has been a breath of fresh air for stagnant FX markets in the past few days, but that may simply be due to resumption of trading after Japan’s five-day Golden Week holidays. Japanese politicians have reverted to verbal intervention to stem the sale of USDJPY that occurred when the Bank of Japan disappointed markets at the end of April. Still, USDJPY is trading where it was before the BoJ meeting.

Commodity currency bloc barking

The Big 3 may be trading like it’s the dog days of summer, but the commodity bloc currencies are trading like dogs — and barking mad ones at that.

AUDUSD, the must-have currency in March and April, has become the mustn’t-have currency since the beginning of May. A surprise rate cut and a dovish central bank statement will do that to a currency.

Kiwi basked in the same glow as Australia. NZDUSD was in demand due to interest rate differentials and a positive economic outlook. But Australia’s rate cut has given rise to speculation that the Reserve Bank of New Zealand will follow suit and cut rates in June.

The Canadian dollar was a hot-ticket in March and April. USDCAD selling was fueled by fuel, specifically rising oil prices with a dash of decent domestic economic data thrown into the mix. That all changed at the beginning of May when WTI found a ceiling in the $46.00/barrel area and weak data turned USDCAD bears into bulls.

A common theme of the commodity currency bloc reversals is that the earlier rallies may have got too far ahead of themselves. That may be just as true for the latest declines as well. Those moves appear to have run out of steam. The AUDUSD decline stalled at the 0.7300 area, which has been both support and resistance in 2016. The NZDUSD drop halted in the 0.6710-20 support/resistance zone from February and March. The USDCAD rally stalled at 1.3020, the mid- April resistance area.

Today’s New Zealand financial stability review could ignite another leg lower in NZDUSD, but if the report is benign, there’s nothing until next week’s Federal Open Market Committee meeting minutes for traders to feed on. The same holds true for Aussie dollar and the loonie. AUDUSD may get bothered by next Tuesday’s release of the Reserve Bank of Australia minutes, while USDCAD is hostage to WTI price swings.

If WTI stays rangebound, the lack of upside momentum and the risk of a correction from oversold positions may limit additional commodity bloc losses until next week.

WTI 4-hour chart with broken uptrend line

Source: Saxo Bank

Dogs of war baring teeth

Uncle Sam seems to be unsatisfied with antagonising Russia and now has added China to the mix. The US, along with Vietnam, Philippines and Taiwan are unhappy with China’s claim of large swathes of the South China Sea. The US sent a guided missile destroyer (the USS William P Lawrence) close to a disputed reef, just to say "hello", and China scrambled fighter jets. To say that China is annoyed is an understatement.

Meanwhile, the Syria conflict rages on despite the US claiming that Syria crossed a “red line” in June 2013. Russia is on the side of the Syrian government which is battling rebels and ISIS. The US is also battling ISIS but supporting the rebels. Today, the US and Russia have promised to “redouble” efforts to end the civil war.

Neither of these events have attracted the attention of FX traders other than as interesting diversions in slow markets, mostly because they have been dragging on for ages.

The removal of oil minister Ali al-Niemi marks a major shakeup in Saudi government and the whole world of oil. Photo: iStock

Out with the old dogs

Saudi deputy crown prince Mohammed Bin Salman solidified his control on the Kingdom’s economy by removing 80-year-old oil minister Ali al-Naimi and replacing him with the former head of Saudi Aramco, Khalid al-Falih.

It was the deputy crown prince who gutted the plans for a production freeze in April when he declared that there would be no deal if Iran didn’t participate. The prince is also spearheading the long-term Saudi Vision 2030 economic plan to wean the Kingdom from its total reliance on oil revenues.

Meanwhile, Iran is going after market share aggressively. Reuters reported this morning, that Iran is selling its heavier crude that is sold to Asia at the biggest discounts to Saudi and Iraqi oil since 2007.

It is easy to believe that the Saudi prince Salman will not take kindly to Iran’s price-cutting actions and respond in kind and perhaps even by increasing production. If so, it suggests that risk/reward favours lower oil prices.

— Edited by John Acher

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US dollar bulls return with attitude 3May16


US dollar bulls return with attitude

Michael O’Neill

FX Consultant / IFXA Ltd

Canada

Recommend

  • USDCAD rejects the low with a vengeance
  • US dollar finds its mojo
  • Oil prices slide on rising output

Watch out! The bulls are back. Photo: iStock

By Michael O’NeillThe US dollar sellers evident during the Asia and European sessions are in becoming an endangered species in New York. The US dollar has found its "mojo" and has recouped sizeable earlier losses.

“If you listen to fools, the mob rules”

Those words of wisdom are as true today as they were in 1981 when Black Sabbath released “Mob Rules”. The 2016 version is “If you listen to fools, the herd rules” which perfectly describes the FX market.

The “fools” in question are the major central banks with Yellen, Draghi and Kuroda all vying for the centre podium. All three of them are guilty of setting up the market to fail.

Prior to the Bank of Japan meeting on April 28, governor Kuroda emphasised to the Wall Street Journal that the BoJ was committed to fighting deflation and unhappy with the current level of USDJPY. That led to heightened expectations of additional monetary stimulus being announced at the April 28th meeting and the herd bought USDJPY. Didn’t happen.

The Federal Reserve Open Market Committee Meeting was held just a day before the BoJ meeting. Various Fed speakers, in speeches and interviews, had assured the “herd” that the meeting was “live". US employment data was extremely strong while other economic indicators were at worse, mixed. The US dollar started to rise ahead of the statement, although just tentatively, which proved fortuitous. The FOMC disappointed.

A week earlier, the European Central Bank was holding court. Expectations were low but traders had sold EURUSD ahead of the meeting in case Mr. Draghi reverted to the aggressively dovish demeanor he has become known for. He didn’t.

EURUSD sellers became buyers, USDJPY buyers became sellers and for the past month, the US dollar has tanked against the G10 currencies (except for Aussie). The herd rules.

Oil disconnect

Saudi Arabia continues to pump oil at near record levels. Russia oil exports jumped in April (Saxo contributor Nadia Kazakova’s article, Russian crude exports jump despite lull in output) Reuters reports that China’s “teapot” refineries are facing logistical bottlenecks, and rising crude inventories, forcing them to cut back on a surge in imports. Global economic forecasts have been downgraded by the OECD and IMF. The Reserve Bank of Australia cited lower global economic growth than forecast as one of their reasons for cutting the cash rate by 25 basis points today. US crude inventories continue to rise and traders should get additional confirmation again today with the release of the weekly API data.

Yet, oil prices continue to rise. WTI is in a well-defined uptrend since hitting the low in February and while prices remain above $40.50/barrel, the uptrend remains intact. And in the words of Canadian stand-up comedian, Russell Peters, “somebody gonna get a hurt real bad”.
It’s hard not to believe that the “somebody” will be oil bulls.

Saudi Arabia is in no hurry to reduce oil production and the heir apparent to the King, Crown Prince Mohammed Bin Salman appears to be controlling the pumps. He is also the man who said that there wouldn’t be any oil production cap or freeze without the participation of Iran. There wasn’t. He seems to have been given free rein to stir up the economy and doesn’t seem all that bothered with lower oil prices. The world remains awash in crude.

WTI prices have declined for the past two days and is currently testing minor support in the $43.50-60/barrel area. A break below would target the uptrend line from February which comes into play at $40.50. If this level breaks, $35.00/barrel would be a realistic target.

Chart WTI (OILUScontinuous) 4 hour

Source: Saxo Bank

USDCAD heading into orbit.

Has USDCAD entered into a consolidation phase? Maybe so. USDCAD made a new 2016 low of 1.2462 overnight and since then has surged over 0.0200 points. A decisive break of 1.2750 is significant. It would suggest that the bottom is in place at 1.2460 and a test of 1.3000 is waiting in the wings.

The catalyst could come Friday. A combination of another strong US nonfarm payrolls report and a very weak Canadian report would send USDCAD soaring.

Chart: USDCAD 4 hour

Source: Saxo Bank

– Edited by Clare MacCarthy

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