The Spectacular Collapse of Iron Ore
The Spectacular Collapse of Iron Ore Falling commodity prices and a weak outlook for growth have increased the chances for a rate cut by the RBA next week – further applying downward pressure on an already weakened AUD. The ASX 200 fell over 30 points last night, as the prices of Iron Ore continue to feel the impacts – with mining & energy stocks leading the way. BHP has lost 2.2% & Rio Tinto ended the session 1.4% lower today. Iron Ore at 10 year lowsThe recent $13bn purchase of a Chinese owned mine in Australia have most definitely awakened this bear. Dubbed the “Sino Iron Project” it has been heavily criticized by the industry – as the Chinese plan to pump millions of tons or Iron Ore into an already over-supplied market. China in Peru, Africa & now Australia On Tuesday, Iron ore fell to $51 per metric ton. That is the lowest it has been since 2004. This now forces the likes of Rio Tinto & BHP to curtail output to boost prices. However, China is not stopping – as the state owned firm citic are planning a 30 year project expanding Worldwide. Even despite the Chinese GDP slowdown, the country still aims to protect it’s future needs. Realities The iron ore price would have to hit about $30 before the two major corps would risk losing money. Many voices in the industry point towards a wall around $45… but let’s see what happens following next weeks prospective rate cuts. Meanwhile… Iron Ore continues to slide…
The Royal Rumble of $USOIL
US Crude rallied over 6% yesterday – marking the biggest single day gain for 7 weeks – despite the prospect of sanctions being lifted on Iranian exports & also despitestorage levels being maxed out! (As discussed in post : Is Iran about to flood the Oil Market?) Let’s take a step back to Thursday, when top analysts from Goldman Sachs & Morgan Stanley remained very bearish and did not expect any real turnaround in the price of Oil. The Boost for Stocks This morning the FTSE 100 was lifted by the major Oil Stocks and the US Future exchanges are also trading higher of the back of this lift.The Stock Market has been affected by the bullish US $ and this brief relief has become a catalyst for the gaining energy sector – as also yesterday’s 2% rise in the S&P Energies showed. Why is a weaker USD & rising Oil better for Stocks? The rising USD has been putting a dent on the earning of multinationals – affecting the major corporations! Hence the reason why we saw a nearly 3% decline in earnings season for the last quarter – For the first time in 6 years!The Oil Price collapse did not help the Stock market either – However, the recent rallies in Oil have supported more bullish traders searching for a technical bottom in this greasy commodity. Post NFP turnaround? Probably the most highest miss of recent times was Friday’s NFP result – around 120K less than expected! – Traditionally NFP sets the tone for monthly trends & we saw some of this “worse than expected” NFP being priced from the ADP release. However, did we really expect it to be that bad?However, as last noted by Mrs Yellen – even though payrolls may disappoint – the average hourly wage has been increasing by nearly 0.5%.In this case, what is the real unemployment rate?… (I will leave that one for you to ponder)… April Crude Forecasts I think that (despite my recent postings) the Oil markets are likely to slowly churn along until the end of the year. Shale production is expected to slow down in December & the Bank’s latest reports suggest that $50 will remain a benchmark before increasing to $58-$60 by September this year. Although, we are still in an OVER-SUPPLIED market and this does not look like slowing down. The US reached another record high at the end of March with around 471 million barrels in storage. Oil producers have most definitely been the most effected – feeling the full impact of falling prices & with Iran set to finalise on a decision at the end of June… are we about to see more World Supply? How will OPEC control this? Adam Longson from Morgan Stanley thinks that no real impact of the Iran deal will be felt until 2016..A bullish move past $60 a barrel will for sure set the tone for a bull move & we could expect to see Stocks rally further. However, there is no real instability in the USD & not really on the cards for the near future…. A tough one! Welcome to the Royal Rumble of Crude! But then why will Oil rally? Will OPEC allow for a $10-$20 per barrel Oil Price?
Will tonight’s FOMC be the catalyst for a move higher in the Euro?
Are we on the brink of a EURUSD rally? The greatest fall in modern historyThe last 9 months have wiped away over 30% of the value in the Euro against the Dollar and with Goldman Sachs & many other analysts calling for further moves to the downside past parity and into 0.80 territory – This post argues for a bottom above parity and for a potential move to the upside. The Turnaround call… (follow the banks)HSBC currency analysts last week called time on the USD rally, after being one of the firsts to spot the Bull in 2013. As US inflation remains shy of its target – policymakers tolerance for this strength will not last for much longer. Furthermore, HSBC said that the USD is the most overvalued currency in the market ahead of the CHF. Fundamental pitfallsThe thriving Dollar & huge outflows from the Eurozone (post tensions from Greece & other failing nations) have combined to fatigue the politically formed currency group. Forecasts of parity claim to be easily achievable as the recent momentum has pointed too – with the Euro continuing it’s stage of decline. Is there any hope left? Short-term relief for this major has come from the recent economic data out of the US – seeing extremely disappointing Non-Farm Payroll figures & analysts pointing towards a more dovish stance from the FED later this evening. This lies key for future FOMC Interest Rate meetings and also discussions for low US inflation as the FED continue to stagnate their first interest rate rise in years. This week, retail sentiment for EURUSD and also GBPUSD has switched to a more “bullish” outlook as buyers eye 1.10 – technical outlook pictures further scope for near-term USD weakness. Are we ready to climb higher? Near-term gains for the Euro should not come as a surprise – especially as commodity markets are turning green and the pressure from the CAD has been somewhat relieved ahead of today’s BOC speech. A break of 1.10 or 1.095 would set the tone for this pair that is torn between ongoing ECN QE and a relentless run of US data on the other hand & A dovish FOMC may just be the catalyst to send this exchange into higher levels. Trading with Atom8 (for the marketing stuff)…Atom8’s unique liquidity allows you to trade EURUSD from 0.1 + commission on MT4, Java or by FIX. Enquire now at www.atom8.com -Peace & Love guys Anish
Have we hit a bottom in the Metals?
Dear Those who dare to ponder We analyse here, the case for a long position in my favorite (sometimes overshadowed) Precious Metal – Silver (XAGUSD)It is first important to understand the history & Economics of Silver trading. As traditionally, Silver was commonly accepted as a monetary metal, but more nowadays its principal uses are for industrial purposes & derivatives trading.Isaac Newton set the monetary relationship between XAU & XAG at 15.5 times when he was the master of the Royal Mint (nearly 300 years ago). However, today the ratio is more about 75 times. Key Fact Supply of mined Silver & scrap recycling materials total 980 million Oz. VsDemand of Silver is currently around 1,080 million Oz. (About 25% being bars & coins)Silver Institute study. circa 2014. It is clear that the characteristic of this white metal is hard to substitute with others. So…. the price can increase somewhat without actually reducing the industrial demand. What contributes to a rise in the metals? The notional thoughts of growing uncertainties among the major currencies economically are priced in a rise of Gold. The yellow metals seen traditionally as a hedge against uncertainty, as from the (almost) 2,000 oz high at the peak of the recession. Will the ongoing EU Crisis & a USD reversal warrant this long position? It stands to reason that Silver will also rise, according to the Newton based relationship and Silver’s price volatility relative to Gold is about 2 times higher… So in a rising market… a good idea would be to get a leverage buy on Silver. As the ongoing uncertainties within the EU & fears of a USD (bull-run) end… Is beginning to interest buyers who are chasing a bottom of both Gold & Silver markets…. Of course, however is the price of Gold falls, the losses of Silver can be expected to correspond greater. Following the end of the gold standard and its replacement with government currencies, there have been many occasions when gold ownership has been banned. Today this may seem unlikely, but confiscation may become increasingly possible if monetary conditions deteriorate in the future. As silver is predominantly an industrial metal, it should offer protection against this possibility. Silver trading at 5 year lows… Dynamics of the W,X,Y Elliot Wave Structure :In 2014… Investor demand outweighed supply by $113M. With Silver ETF trust fund holdings holding now record level highs in supply… However, some analysts think such a robust & consistent demand for Silver is crazy… As you can see from the chart above “retail investors” kept buying silver as it kept falling…. From $49.50 in 2011 to $12.40 in the spot market… A new, sudden & brief 5 year low! Metally speaking… Technologies are now replacing the demand lost from smart phones… & the industrial uses of Silver is now once more questioned… However, many people look at Silver as an “indispensable metal” from solar panels to “Silver” touch screens… Furthermore, if you look at this market from an “Eagles eye”… the fact is that it looks historically cheap in terms of Gold. Being a noble metal, Silver does not rust or corrode… it is the most conductive of all materials for electricity… With Global growth… you can build a solid case for Silver’s long-term value… But as short-term traders now… When Silver moves… It really moves as the 19% day rally proved back in December 14. Sane investors can fast track their Silver buying spree & check outwww.atom8.com for the lowest possible costs. Peace & Love Guys -Anish Any questions, let me know & your feedback is most appreciated…
$10 Oil by 2016?
Dear Readers From our highs of $110 last year… We have seen the price of oil fall to uncharted territory – Lows not seen for 6 years & it looks like there is no stopping this fall… But what is the driving force behind the decline? & why are prices not being absorbed into our REAL Economy? Why are Petrol prices not falling & why are my flight tickets more expensive than last year?Let’s try and break this down…Key Economic Facts The value of WTI/Brent has fallen over 50% in under 12 months; US Oil Production is at record highs; US Hoarding levels are at all-time highs (Storage with the anticipation of a price hike); Refineries are due to be offline for repairs in Spring…Storage levels set to increase further; Source : DailyFXPolitical Uncertainties Let’s take Iran for example… the falling Oil price has probably hit Iran more than others, given their export sanctions & talks of relaxing their sanctions have driven down global prices… Why is Iran so important? IRAN has almost 10% of the world’s proven reserves; Iran has 37 million barrels of oil in storage ready for IMMEDIATE export Relaxing sanctions would significantly support the European economies (who are becoming more reliant on trans-Atlantic Crude) & also ease the black-market issues which lurk in the background.The US Economy would also infact benefit!However, actual oil production has dropped over 60% in the last 3 years; and Financial sanctions have made it extremely difficult for Iran to attract FDI to actually pump Oil out of the ground. Back in late 2014, India was importing 350,000 barrels of Iranian oil per day… That has now fallen to 50K. What will happen now? Yesterday, Oil prices began their fight back on the back of a weaker USD… but this could easily be short-lived. As Oil Storage capacities continue to deplete, it becomes more likely that prices could drop significantly. However, this also depends on the extent of production…. As all of this occurs, demand for domestic crude in the US declines… pushing prices down & forcing more into storage…. “WTI could drop to $35 per barrel in the coming months” Projection from Societe General.Could Oil become the Most Lucrative Investment in Modern History? As populations continue to exponentially increase… there is no doubt demand will rise… However, a renewed bout of weakness in the oil markets, notwithstanding this week’s price gains, was further backed up by comments from the Saudi Arabia’s OPEC governor Mohammed al-Madi, who said on March 22 that a return to $100 per barrel would be hard to reach. Saudi Arabia’s Oil Minister Ali al-Naimi reiterated that position, blaming non-OPEC producers for their unwillingness to cut back on production. He said that OPEC will not do it alone, and even revealed the fact that Saudi Arabia recently boosted its oil production to 10 million barrels per day. “The production of OPEC is 30 percent of the market, 70 percent from non-OPEC…everybody is supposed to participate if we want to improve prices,” al-Naimi said.Trading Oil with Atom8 – Coming soon for April 2015Hope you enjoyed the read. Any comments, Feedback would be largely appreciated.Peace & Love Anish @anish8fx
Slamming the brakes on the Gulf’s Growth
As the Arab “Boom Years” draw to a close, we now see events over the last 4-5 years (for example, the Arab Spring) form as a catalyst for the recent Oil price decline… Almost 50% from this time last year. Simultaneous challenges of the threats from ISIS, political transitions & falling Oil prices have remained extremely prevalent in 2015 and more so impacting the Oil rich states of North Africa over the Middle-East. Slamming the brakes on the Gulf’s Growth As Political turmoil spreads, the jihadi threats hover over Syria, Iraq & more recently producing itself in the conflicts around Libya’s oil fields, as well as recent violence in Tunisia (post-Arab spring transitions). The recent weeks headlines have been focused around Yemen and the coalition of Sunni Islamic states prodding their Gold feet over the Pan-Arabian Muslims – attempting to constrain an unwanted addition of rival Iran. Libya, once Africa’s richest nations is now on the verge of Bankruptcy.. being named “The New Somalia”, as their new Government warns of an “Oil Production Shutdown” given the ongoing threats from ISIS and their “Black-Market” demands. No-one could of imagined in Post-Gaddafi Libya that their nations Energy sector would be so badly affected. Economic Impacts Since the recent Egyptian revolution in 2011, Egypt’s credit rating fell 6 points… Tunisia, since it’s revolution has declined 4 points… Egypt has been under the spotlight since 2011 as Ibrahim Mahlab’s party seeks stability & attempts to gain against it’s economic shortfalls. These Gulf states were somewhat supported by years of $100+ oil prices, as well as donations from other powering Arab nations (For example, UAE donating almost $20bn to Egypt + a further $12bn from Saudi & Kuwait… for aid & “investment”) Egypt, in particular is viewed as pivotal in bridging the gap between the Middle-East & the North African states… as the UAE’s Minister of State quotes “Egypt is central to the prosperity of the Middle-East” . However, the fall in Oil prices provokes pressures and furthermore, an instant-stimulus for these struggling economies. Private Investor’s eyesMost Foreign Investor’s are burdened by the risks of domestic unrest and in attempting to control the “social peace”, economic reforms to boost investment & reduce subsidies could be expected.. The overall thought is that the plunging Government revenues will surely filter into the real economy and the Growth forecasts become largely cloudy. Already, real estate prices in the once BOOMING Dubai are now largely reducing and empty skyscrapers now account for 25% of Dubai’s population. More-over, core infrastructure projects around the Gulf will be haltered, for example new Transport lines… at least until the Oil market stabilizes… if that. With $20 Oil on the horizon…. Will these Economies Survive?
Is Iran about to flood the Oil Market?
In my post : Oil to $20 by 2016 looks to be supported, perhaps underestimated by the upcoming decision on Iran’s nuclear deal & also talks of removing Economic Sanctions for Iranian Crude Exports. Potentially one of the Middle-East’s biggest economies, Iran has been barred out by the West in refusing to give up it’s Nuclear regimes. However, new developments have come from talks between Iranian negotiators & world leaders continued in Lausanne this weekend. Tehran – A sleeping Oil GiantSince Economic sanctions had been placed on Iran, Tehran has been frozen out from the International Oil markets & denied access to Investment leading to key developments in the Oil/Gas industries. With Oil prices pressured by the over-supply – any increase in Iranian output could easily speed up this decline down towards $20 per barrel. The Iranian Oil minster mentioned that they could easily increase production by 1 million barrels per day, almost immediately after sanctions are lifted. Trouble with OPEC & Saudi ArabiaA potential limitation to this “flooding” impact comes from OPEC – the 12 member cartel controlling a 3rd of the World’s oil supply. It currently maintains a quota system that Iran would have to negotiate. It is unlikely that Saudi Arabia will be in favor of any increase to Iranian exports & their ongoing meetings up until June will tell of these tales…. However, oil may reach $20 by then already!