Intraday Market Thoughts

EUR Cheers Hollandexit, More Cheers to Come?

Dec 2, 2016 0:03 | by Adam Button

The final month of the year has arrived and over the past 16 years, that's led to a familiar pattern. The Canadian dollar was the top performer while the US dollar lagged. Australian retail sales are up next. The Premium trades in oil and GBPUSD were stopped out. A new trade in a US index has been issued, joining 2 existing  index trades, which have deepened into green territory.

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EUR Cheers Hollandexit, More Cheers to Come? - Eurusd Weekly Rsi Dec 1 (Chart 1)

Markets cheering the exit of a world leader is a special kind of slap in the face. But it was one that French President Hollande received on Thursday when he revealed that he won't run for re-election. The euro extended its rally by more than 30 pips to cap off a 70-pip gain and the best close since Nov 16.

The euro is coming off a brutal drop in November as the US dollar surged but one reason for hope is the calendar. Since the euro's inception, December has been easily the best month. It's gained an average of nearly 2%.

Last year the euro bottomed on December 2 at 1.0563 then finished the month 3.26% higher. The triggers then were the ECB and Fed. With both on the calendar and the euro with support below, it's possible we could see a repeat.

Here are some other December seasonal trends:

It's the second-worst month for cable. It's the best month for EUR/GBP longs. AUD/USD often struggles in December. Bonds sag in December. December is the second-best month for the S&P 500.

In the short term, the market will be focused on the Australian dollar and the October retail sales report due at 0030 GMT. The consensus is for a 0.3% rise following the 0.6% jump in September.

Act Exp Prev GMT
Retail Sales (m/m)
0.3% 0.6% Dec 02 0:30

سبعة حقائق قاسية حول اتفاق أوبك

Dec 1, 2016 13:13 | by Ashraf Laidi

يثير قرار أوبك أسئلة أكثر من الأجوبة. فقد اختفت كل علامات الاستياء في اجتماع اوبك في فيينا فجأة حينما وافقت الدول الأعضاء على التجميد الكامل والحد من الإنتاج الذي نوقش في الجزائر منذ شهرين.


كان الإصرار الشديد من قِبل الدول الأعضاء على معارضة نظام الحصص واحداً من أكثر الجوانب المحيرة قبيل اجتماع أوبك على الرغم من أنه قد ثبت عدة مرات في الماضي أنه يمكن لتلك الدول أن تتجاوز حصص الإنتاج تلك.

إن ما يجعلنا نتشكك في أعقاب الاتفاق على خفض إنتاج شهر أكتوبر ب 1.2 مليون برميل يومياً هو مدى سهولة تحقق ذلك في نهاية المطاف. فقد كانت حصص إنتاج كل من إيران والعراق في مستويات أقل مما كانت تهدف إليه، وربما حتى في مستويات أقل مما كانت تنوي إنتاجه.

هذه هي ال 7 حقائق قاسية حول اتفاق أوبك

    لا توجد لدى أوبك آلية إنفاذ حقيقية وكل دولة من الدول الأعضاء كانت قد تجاوزت حصص انتاجها في الماضي بشكل روتيني. هناك سبب وجيه لنتوقع هذا اليوم.

    مع ارتفاع قيمة الدولار الأمريكي بنسبة 10٪ عن مستواه مع بداية تراجع قيمة النفط عام 2014، كان لدى كلِّ من الأعضاء وغير الأعضاء في أوبك العطش الشديد لإنتاج كل برميل يمكنهم الحصول عليه لكسب المزيد من العملة الأمريكية ذات الجاذبية الأكبر.

     يبدو بأن القرار الذي اتخذته أوبك يوم الأربعاء كان يهدف إلى حد كبير إلى إظهار الوحدة من أجل دحض تكهنات متزايدة من زواله.

    بغض النظر عما إذا كنت تعتقد أن إيران قدمت تضحيات من خلال خفض الإنتاج أو أنها أصبحت لها اليد العليا على المملكة العربية السعودية التي كان انتاجها أقل بكثير مقارنة بإنتاج أكبر منتج في المنظمة، لا يمكنني تجاهل حقيقة أن موافقة إيران على خفض الانتاج أدى إلى واحدة من أكبر الزيادات في سعر السهم لمنتجي النفط في الولايات المتحدة (بقدر 20٪ بالنسبة للبعض) خلال يوم واحد، والذي جاء لصالح مؤيدي دونالد ترامب. فلا يمكن للمرء أن يفلت مما يعني ضمناً بأن هذا الأمر يقلل من احتمال المواجهة بين طهران وواشنطن ترامب.

-     أتوقع أن عواقب رفض صفقة كانت أكبر من عواقب القبول بها، حتى إذا كانت الدول الأعضاء لا تنوي احترام الاتفاق. فلبعض الدول، لم يكن هناك ضرر من الاتفاق وفي هذه العملية، أقنعت أوبك روسيا والآخرين بالانضمام لاتفاق خفض الانتاج.

    سيثبت هذا القرار أنه ليس سوى حيلة دعائية حتى وإن كان سعر الخام الامريكي قد ارتفع بأكثر من 6٪. هناك احتمالات هائلة ل “بيع الخبر" في الأيام المقبلة في ظل الشكوك حول ما إذا كان سيتم اتباع حصص الإنتاج. كانت هناك حتى بعض الأدلة على أنه ما تم الإعلان عن الصفقة بشكل رسمي حتى بلغ الخام الأمريكي ذروته.

    السؤال الآن هو ما إذا كان السوق يحسن النية في أوبك؟ قد يكون الجواب في التحليل الفني لأسعار النفط. تجاوز الخام الامريكي أعلى مستوياته في نوفمبر والتي بلغت 49.20 دولار امريكي لكنها أغلقت دونه. ومن المرجح أن يتجاوز مستوى 50 دولار أمريكي، ولكن انخفاض 53-53 دولار أمريكي إلى منتصف 30 دولار أمريكي هو أكثر قبولا من الارتفاع إلى 60 دولار أمريكي.

OPEC Decision: Smooth, or Too Smooth?

Nov 30, 2016 23:36 | by Adam Button

All the rumblings of discontent at the OPEC meeting in Vienna vanished as members agreed to the full production freezes/cuts that were discussed in Algeria. The pound was the top performer while the yen lagged and oil gained more than 8%.

كيفية تداول الين و قوة الدولار (فيديو للمشتركين فقط)

What puzzled us repeatedly in the lead-up to the OPEC meeting was how bitterly countries were fighting quotas when history has shown that they can easily be flouted.

What makes us suspicious in the aftermath of the agreement to cut 1.2 mbpd from October production was how easily it came together in the end. Iran and Iraq's quotas are at lower levels than they wanted and, perhaps, they are at levels below where they intend to produce.

OPEC has no real enforcement mechanism and every member nation has routinely over-produced in the past.

At the end of the day, the consequences of balking at a deal were far higher than agreeing, even if member countries don't intend to respect the deal. For individual countries, there was absolutely no downside to agreeing and in the process, OPEC convinced Russia and others to join in cuts.

Ultimately, the decision may prove to be nothing more than a publicity stunt but it worked so far with WTI finishing up $3.75 to $48.98. There is a chance of a 'sell the fact' trade in the coming days on skepticism about whether the quotas will be complied with. There was even some evidence of that as the deal was formally announced and crude plateaued.

The question now is whether the market gives OPEC the benefit of the doubt. The answer might be in the technicals. WTI traded above the previous Nov high of $49.20 but closed below it. That's an early negative sign but we stress that it's early. If crude can close above $49.20 (or better yet $50) in the day ahead, then expect the oil bulls to grab some momentum.

Tangentially from crude, the mediocre performance of the Canadian dollar on Wednesday was a surprise. USD/CAD finished close to flat despite the huge oil rally and Sept Canadian GDP at 0.3% was better than 0.1% expected. Of course, it might just be a month-end skew.

Act Exp Prev GMT
GDP (m/m)
0.3% 0.1% 0.2% Nov 30 13:30

What's at Stake in Vienna

Nov 29, 2016 23:42 | by Adam Button

The long-anticipated OPEC meeting takes place Wednesday and a deal is a 50/50 bet. We look at the implications for oil prices. The New Zealand dollar was the top performer while the yen lagged. Below is the video for Premium subscribers, covering FX, indices, gold, silver and US crude as well as existing trades.

A month ago, OPEC ministers were talking about this meeting like it was a done deal but it's quickly unraveled. Oil prices fell nearly 4% on Tuesday after rumblings and discord. The main sticking points are Iran and Iraq. Iran is attempting to recover from sanctions that were lifted early this year and Iraq wants extra room to produce because of losses in ISIS-controlled areas.

Iraq wants to produce at its October level of 4.55 million barrels per day and OPEC wants a 200K bpd cut. Iran wants to get close to 4 mbpd but OPEC is pushing for a quota around 3.8 mbpd.

Iran has pushed back and asked Saudi Arabia to cut to 9.6 mbpd from 10.5 mbpd in October. That sounds like a hefty sacrifice but Iran argues that Saudi Arabia is producing beyond its current capacity and that a drop to the Saudi-proposed level of 10.1 mbpd would happen without a 'cut'.

Overall, OPEC is looking for 1.2 mbpd in cuts from October levels.

So what happens if a deal falls apart?

The Sept/Nov lows of $42.60/$42.15 are the first main line of support. That will be challenged and will likely break. Next will be $40 and the August low of $39.19.

WTI crude could easily fall further but it partly depends on how the failure occurs. If it ends in total discord and finger-pointing with hints at a battle for market share, the downside could be $35 or lower in time. If it ends with a constructive tone and talk of another meeting/freeze in January then $40 is likely to hold.

A deal coming together remains a strong possibility. Logically, OPEC has nothing to lose by making an agreement even if they intend to flout the quotas. All member nations have a long history of doing exactly that. What's preventing it is the public grandstanding and petty squabbles between fierce rivals but it's certainly in everyone's interest to put it aside.

If that happens and a quota that cuts 1.0-1.2 mbpd is agreed for six months starting in January (as rumored), expect a rally in oil. The quota may be announced as a total number at 32.5-32.7 mbpd.

The market reaction might be less-dramatic than a breakdown but the kneejerk will still be +$3 and challenge the November high of $49.18. Beyond that is the October high of $51.93 but there is also the risk of a 'sell the fact' type of reaction where any rally is fleeting.

Whatever happens, the momentum is likely to last for at least a few days. There is one trade in US crude for Premium subscribers, alongside 6 other trades in FX, equity indices and commodities.

Oil Bears Decided on OPEC Indecision

Nov 29, 2016 16:06 | by Adam Button

OPEC negotiations are once again poised to go down the final hours as old rivals strike a hard line. The latest indications are positive  and that's touched off a rebound in oil and CAD. US Q3 GDP was revised to a higher than expected 3.2% from the previously reported 2.9% aided by improved consumer spending. The Premium trade in oil put on Friday remains is currently more tha 100 pts in the green, alongside 2 other indices trades. 2 FX and commodity trades are in the red.

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Oil Bears Decided on OPEC Indecision - Gold Oil Daily Nov 29 (Chart 1)

OPEC leaders are convening in Vienna as final talks ahead of Wednesday's announcement begin. On the weekend, signs of discord destroyed the illusion that it was virtually a done deal. Algeria's oil minister flew to Tehran to help broker a deal and a Saudi official said the market could rebalance on its own. That was a signal they would be ready to walk away from any proposal.

Iran and Iraq are the main sticking points. Iraq has shown a willingness to compromise but it wants flexibility to bring production back online in ISIS-controlled areas. Iran is more insistent on raising production to 4 million barrels per day and beyond.

The details are also snagging points. Most of OPEC wants production numbers based on secondary sources, which are usually tabulated by Reuters. Others want the ability to self-report.

The bulk of these questions have lingered for months despite many rounds of meetings and discussions. That points to the unlikelihood of a deal and a potential fall in crude prices.

The flipside is that the consequences of failing are much high. Oil prices are likely to crater if Iran and or Saudi Arabia balks. Meanwhile, either country could 'agree' to a quota and then flout it anyway.

Violating quotas is an OPEC tradition. Some members have violated quotas in every month they've been imposed. Even the most-disciplined countries have broken promises on quotas in 70% of months, according to OPEC watchers

Monday's trade highlights the difficulties in the minute-to-minute trade. Crude dropped to $45.14 at the open on the Saudi comments but rallied back to $47.23 on renewed optimism after comments from Iraq. It is now back at fresh 1-week low of $45.05. Expect the ebb and flow to continue until the last minute of discussions Wednesday.

Month-end trading volatilility will compound OPEC's mixed messages. But watch USDJPY and its pattern of losing US session strength into the Asian session. Yen sellers have tended to back off ahead of the Tokyo session as the Bank of Japan sets to buy JGBS on offer in order to cap yields. But yen selling has resurfaced by the end of Asia trade. We shall watch whether the pattern remains intact in the midst of month-end flows.

Act Exp Prev GMT
FOMC's Powell Speaks
Nov 29 17:40