Saturday April 16, 2016 - 11:56:49 GMT
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Doha OPEC Meeting Dominating Trade
John M. Bland, MBA, CTA
Shifting Trading Sands
Crude Oil markets have been on edge for the past two weeks heading into the OPEC meeting this weekend in Doha, Qatar. Odds are its outcome will be anti-climatic following reports of an agreement between Russia and Saudi Arabia to cap oil production at January levels. January saw production at near-record levels, so this "cap" is not being seen as onerous.
Furthermore, Iran is unlikely to participate in any production limitation as it continues to ramp up production following the recent easing of sanction. Support for oil prices recently has been coming from low prices themselves, as high-cost producers have been forced to curtail uneconomic production. On the other hand, higher cost production will start to resume as prices rise again. The global economy will continue to be over-supplied oil after this week-end until an equilibrium price is oil is found. For traders, rising Crude prices are constructive for the large energy sector of the U.S. economy. Thus they support equity index valuations.
Current Market Conditions
Given the tight correlations in many trading markets, whether they realize it or not, forex traders are also trading the oil markets, if only indirectly. HIgher oil prices support stocks and the USDJPY and S&P have been tightly correlated for many years. Because of low interest rates, both the JPY and EUR are funding currencies for equity carry trades, so they move when stocks move. In response to slight recent improvements in the U.S. economy, the USD has been looking a little better, but it probably still is confined to our rough 1.10 to 1.15 trading range.
WEEKLY HIGH IMPACT NEWS:
21:45 NZ- CPI (late Sunday)
09:00 DE- ZEW Survey
12:30 US- House Starts/Permits
08:30 GB- Employment
14:30 US- EIA Crude
08:30 GB- Retail Sales
11:45 EZ- ECB Decision
14:00 US- Existing Homes Sales
ALL Day- flash PMIs
12:30 CA- CPI
12:30 CA- Retail Sales
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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