Advertisement
Advertisement

Oil Surges on OPEC and the Dollar Weathers Fed Speak

By:
David Frank

It would seem another fundamental event has generated a large response in volatility as OPEC is mastering the act of jawboning. No exact specifics but

Oil Surges on OPEC and the Dollar Weathers Fed Speak

In this article:

It would seem another fundamental event has generated a large response in volatility as OPEC is mastering the act of jawboning. No exact specifics but enough to move crude oil as well as several Forex pairs. The event risk happened on the third and final day of the informal OPEC meeting in Algiers as the oil cartel discussed their plans to possibly cap production and deal with global supply glut. After many failed efforts to curtail production, they have finally found some common ground. This will hopefully lead to an output cap among members and non-members. There are no real details and the time table for implementation is more than a month out but the markets responded swiftly to the news.

Crude oil has seen one of its largest rallies in months and the USD/CAD Forex pare felt the cross winds as it reversed sharply from range resistance. Please see the below daily MT 4 chart. However, there is that matter of conviction. Is this enough for the markets to see solid follow through? Canadian Dollar Forex pairs are still in their broader ranges and have only seen a small part of any motivation from energy prices. Oil prices are also facing major range zone barrier that could lead to more consolidation in the financial markets. In other words, it will take more than a promise for a cap on production from OPEC to produce a broader change in sentiment in the other global financial markets.

USD/CAD

In other risk oriented benchmarks, like the S&P 500, the EUR/USD and USD/JPY we are seeing the following approach to trading emerging. Short-term technical heavy with congestion-based trades setting up. Allow for generous stops and reasonable (safe) initial targets. When we look at these financial markets, we see a plethora of fundamental event risk coming up on the calendar. There is a balance in favor of the hawks moving forward. There is still fallout from the Brexit vote. Bank of Japan monetary policy and how effective it is will be assessed by upcoming data releases However, neither the British Pound nor the Japanese yen will be easily swayed. On an interesting note, there is an interesting vote coming out of Mexico that will affect the USD/MXN Forex pair. The health of the Mexican peso will be contingent upon the US election for US President and the willingness of the Bank of Mexico to jump in and influence the market. They have already intervened with the peso along with exchange rate jumps this year.

About the Author

Did you find this article useful?

Advertisement