The Vicious Downward Cycle of Oil
Ladies & Gentlemen Oil once more trades at a near 2-month low and as vicious as it has been, the oil price collapsing cycle does not look to be over just yet. However, large institutions and Central Banks further seek a longer period of stability, especially in the eyes of the Bond Markets. The US are still heavily over-supplied and refineries continue to close down, due to mounting costs from a alack of productivity. The big players are still looking at holding sub $50 and hedging their risk with the Futures Markets… These “players” may be the ones the Central Banks turn to in the near future to assist in the un-cuffing of this downward spiral. OPEC have been heavily pressured by Venezuela (Country with the World’s largest known Oil reserves) to do something about the Oil price and have been supported by one of Africa’s biggest Oil producer, Algeria. Contrary to views from the Gulf who are welcoming the lower prices, seeing it as a chance to reform & these contrast of views continue to bear onto a larger Geo-Political issue. But how big is this issue? Saudi Arabia, the world’s largest Oil mover has been doing things recently, that in the last 30 years have been unimaginable ;1. Withdrawing money from overseas;2. Delaying contract payments; and3. Taxing lands. So how does the Market quantify these issues?.. Let’s pause for a second and cast our mind backs to mid 2007 when the Oil price hit $145.00 per barrel and the Gulf generated more money that they knew what to do with & the fact remains that Saudi’s Debt:GDP ratio is still less than 2% and in the next 10 years is estimated to stay below 7%… The main Gulf states could actually live comfortably for several years from these revenues built. So contrary to the “Geo-Politics” – Investors are more focused on the supply-side issues and may be more keen to ignore the political nature surrounding the MENA regions. Storage is still reaching tank-tops and if this trend continues, we may see for the first time in 20 years – oil investments declining for two consecutive years and this may be an indication for future oil markets.. as they look to continue their downward spiral. Optimists still seek a bottoming level – looking at Iran supplies for next year to help boost $60+ for 2017 (perhaps a fascinating new dynamic for the near future), however the fundamentalists outlook is further lower to find a strong re balance in the market. Best of luck Anish
Calls in from the Trading Floor – Hold your Oil Shorts!
“Hold your Oil Shorts” Calls from the Floor Ladies & Gentlemen As our eyes turn to the weekend – the volatile weekly Oil market draws to a close after a neat 10% slide on the back of further global supply gluts. From my post labelled “Crude Oil – A Bargain Hunt” the larger oil producing nations are looking at the $50 mark as the benchmark heading into 2016. However, the institutions & techies are looking at $50 as a perfect opportunity to remain short. So how are the Traders actually clicking? Well.. the more short-term clickers are looking at more downside targets, however some trading puritans would argue about the risk:retun. Although, as i Look at the chart & price action this morning, you can see that the market is heavily gripped by short covers. Hence the phrase “if I can scoop a small profit I will take my money and run” in my original post. Looking at a first target of $46.90 and would target ever 5 cent fall beneath this level. Tempted to leave this short open for the rest of the day heading into early next week – especially after 4 days of straight decline. WTI is set to make its steepest weekly loss in 10 weeks and Brent in 8 weeks. The Market is expected to remain heavily over-supplied heading into 2016 & sadly for the Oil companies – The Facts do not lie! Some Oil optimists are hoping that Shale production forecasts are on the decline, as output is geared towards a fall in November and also data from the EIA showed gasoline stocks falling by 2.6 mio barrels per week. Best of luck with your positions AnishFX @ Atom8.com
Gold : A Mastermind of the “Break-Out” – $1300 by 2016?
Gold : A Mastermind of the “Break-Out” – $1300 by 2016? Ladies and Gentlemen The precious yellow metal is back in the spot light after forming a pretty dull range so far this year between $1200.00 / $1100.00 and the outlook has remained bearish. However, this has all changed in the past few days as the October Bull awakens to the more uncertain Economic landscape, especially breathing from the US & from increased Geo-political action (The Ruski’s in particular)! Gold (XAUUSD.v) is showing strength above 1170 (formed yesterday) and all my indicators are pointing towards a further bull offensive. The commodity must continue to trade & hold above it’s broker resistance (turned support) at 1170 to really create more scope for strength heading into the final months of 2016. On the other click, if you remain a bear in this market – support comes in more at the 1165 level, where a break down to 1150.00 will really slam the brakes again on the metal. Me personally, I am hoping for a break of 1200 as I really do miss the days of huge Gold daily volume. fig: Atom8 MT4 Terminal How high could we go? After breaking a “key resistance” level, the investor sentiment is more positive and will probably attempt to push it to a high for year-end. Gold is now trading above it’s 200-day MA for the first time since May & prices could be further buoyed by (what is now expected to be) weaker US data & that the FED are now looking to raise rates next year. A call for above 1200.00 could be realistic by December and I would not be surprised if we even saw a move to the $1,300 mark – as volume for Metals expect to be double by next year (source : mining.com). Best of luck Traders, Anish @ Atom8.com
All Aboard the Roller-Coaster that is Cable
Ladies & Gentlemen In the last 24 hours we have witnessed one of the most wildest days for Cable, with a near 200 pip swing – behaving more like a “spoiled kid” trading FX for the first time. We moved to 1.5390 when the AB InBEV / SAB Miller deal (now the world’s biggest brewery) was announced before a sharp move to 1.5210. UK employment data this morning has kept calmer the beast that could form this month in Sterling as it is held below 1.53… For now at least! The UK ILO Jobless rate was posted at 5.4%, actually the lowest since mid-2008… giving a further insight into an all important component for the UK employment sector, as people get their butts into work before Christmas. So what are the important intra-day levels to watch? Well the initial hurdle of 1.53 is clear and above that to really prove bullish power would be 1.5345, where the 200-Day SMA marks. However, a breakdown in Cable this week could fast see an exposure of 1.5107 – the low from October 1st and then a bearish eye towards the 1.50 levels once more (lows of May & also key psychological support). What is the Future for Cable? – Again the long-term dynamics of £/$ are likely to be determined by the continued debate around rate hikes and as we all know the global economy is slowing slightly and this slow-down could backlash on the UK as well as the USA. The near-term bias could still be on the down-side. Wishing you the best of Luck Anish 8FX
Crude Oil – A bargain hunt heading into 2016?
Dear Traders As we enter the final quarter in 2015, investors are watching the price of Crude Oil with an eagles eye. Oil prices have been on a roller-coaster ride over the past few weeks, coming from 6-year lows and with talks of $30 per barrel (being the new normal) a few months ago, we have seen a remarkable comeback as the $50 mark was crossed for the first time since July. It looks like more short-term players have seen this opportunity above $50 for greater profit-taking and more sizable positions seem to have taken the market back to $47 & if this price is not screaming for a “Pull-Back” before year-end.. I don’t know what is! However, more “conservative” fundamentalists focused on the over-supplied commodity are ignoring the price action and looking at more longer-term consolidations up to year-end & maybe till future rate-hikes – the recent drop in oil-rig counts did not help either! OPEC remain firm that demand should begin to increase in early 2016 and this should naturally reduce the worried over-supply figures, resulting in a more “balanced” market – which if true, should see investors price in a more bullish price action heading up to year-end. However, warnings persist from the International Energy Agency insisting over-supply is set to stay. Although this view did not stop the Chinese “Bargain Hunters” from buying up more of the market last month. With Russia now heavily involved in Syria and also stamping its foothold around the Middle-East’s perimeter, the geo-political dynamics of the Oil Markets have a new found tension from the prospect of a potential stand-off between the US & Russia, as Russia looks at prioritizing it’s hand in the Middle-Eastern Crude supply.Recent ISIS attacks on production facilities in Norther Iraq have also added to this dynamic and of course, oil nations and businesses are keeping this in mind when attempting to analyse their quarter-end plans. Overall, it is important to note that there is still an oversupply (surplus of around 1 million barrels per day). However, the “rebalance” force should help calm this supply over the next 12 months, where a turn upwards of $70-75 would really indicate a rebalanced market. Trade OIL with Atom8Atom8 are now proud to announce the launch of USOIL as a new CFD on their leading MT4 terminal. Spreads start from 1 pip and if you would like to test the core pricing, please email info@atom8.com
The most important NFP of 2015
Ladies and Gentlemen Today at 13.30 BST we get the latest employment report from the United States, it will assist government policy makers in their quest to decide on the timing of the first rate rise since 2006. The change in Non-Farm payrolls is expected to be 217k according to the Bloomberg Survey, the report is seen as the deciding factor for the September FOMC. Commentators believe the chances of ‘lift off’ have diminished in the light of the financial turmoil, however the employment survey was concluded before this period. The August number is heavily influenced by seasonal factors and difficult to predict. Over the last 10 years the difference between the consensus and the actually number has been biggest in both March and August, there was a 119k miss in March of this year let’s hope we are closer for August. It is important to remember the dual mandate of the Fed, meaning that both employment and inflation will have to be at levels where tightening monetary policy is appropriate. The unemployment rate which has already reached the top end of the Fed’s year end projection 5.2%, is a 7 year low. However, a falling oil price means away from the workforce there is a disinflationary environment and may enable the key decision to be delayed. At Atom8 we are cognisant that this is an important number and that it is worthwhile looking at all the data that is released at 13.30 including the July revisions. Good Luck
As the #BOE “Super Thursday” approaches.. What shall we expect to see?
Ladies and Gentlemen, If you look at the list of data being released tomorrow in the UK, you will see why the media are referring to it as ‘Super GBP Thursday’. 09:00 New Car Registrations 09:30 Industrial Production Manufacturing Production 12:00 Bank of England Inflation Report and Minutes to the meeting Bank of England Bank rate (0.5%) We get 3 data points from the BOE at midday, the minutes of its policy meeting, the quarterly inflation report forecast and the Interest rate decision, presently 0.5%. Normally, these reports are on separate days. What should we be looking out for? How the members of the MPC vote, the last 7 meetings have been 9-0. Are there any dissenters in the ranks? Martin Weale confirmed he was one of two members that nearly voted for rate rise at the last meeting and JP Morgan have forecast a 6-3 vote. Who are the other possible dissenters? Kristin Forbes said there will be a rate rise ‘in the not too distant future’. However I take note from the BOE chief economist Andrew Haldane ‘ For me the combination of a healing economy, very low price pressures and a wobbly world means there is no rush to move rates from where they are now’. It is important to remember that the BOE mandate is to deliver price stability and then support growth and employment. It will a very interesting day as the market presently expects a rate rise in May of next year, if the hawks win then 1.5680 is the level to watch whilst a leaning towards the doves would see 1.5470 tested. Good Luck
Is the Australian Economy losing its shine?
Is the Australian economy losing its shine? The flippant answer is look at their cricket team, not the dominant force they once were However the more considered answer is that the economic slide is partly due to circumstances beyond the government’s control. Commodity prices have fallen, the Australian economy has been based around mining and commodities so a period of adjustment is to be expected. Event Risk – RBA Announcement (4th August 05:30) What impact will lower interest rates have and is this tool the answer? Lower interest rates are fuelling ‘Asset Bubbles’. This is a global story but the Sydney Housing market is the extreme, up a staggering 18.4% (yoy) whilst economic growth has not reached over 3% So why reduce rates further? The currency is 35% lower over 4 years surely this should help exporters however the jobless rate is still stuck around 6% and business confidence surveys are not at the level the government would like. A cut is the short term fix but there is a longer term issue. The cash rate is at 2% and very few expect a cut to 1.75% (25 out of 28 economists polled by Bloomberg have rates on hold.) We get the quarterly monetary policy statement on Friday the last two times the Reserve Bank Board members meet before this statement they cut 25 basis points As the proverb goes being forewarned is forearmed.
FED : Risk Event or Non-Risk Event?
Today the two day Federal Reserve meetings start. Chairwoman Janet Yellen is not holding a press conference and updated economic projections will not be released. This meeting is dismissed as a ‘non-event’, however the statement will be released at 19:00 BST and should be digested quickly just in case it is an ‘event’. Look out for the following:- Rates on hold, the last rate hike was in 2006, a hint might be given by tweaking their description of the economy. The Fed has a dual mandate, both employment and stable prices. An upbeat assessment of the job market whilst energy prices have weakened could signal lift-off. The last five Fed Policy Statements have been approved by a 10-0 vote, will this unanimity last forever? Jeffrey Lacker, Richmond Fed President, is seen as the possible dissenter If this is a non-event we have to wait until September 17 for our next guidance Good Luck Anish S. Lal @anish8fx FX & Precious Metals, Atom8 Financial Services LLP 2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com Risk Warning Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite. You could lose more than your initial investment and should not trade with funds you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Timeline : Next 72 hours for Greece. Market gap for 3rd week in a row?
Link : http://anish8fx.blogspot.co.uk/2015/07/will-markets-gap-for-third-week-in-row.html