We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Bullish
Gold
Bullish
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Mixed
More View more
Real Time News
  • RT @YuanTalks: #China temporarily suspend additional tariffs of either 10% or 5% on some #US goods scheduled to take effect on Dec 15, said…
  • The gold-silver ratio is simple. It is the number of silver ounces you would need to trade to receive one ounce of #gold at current market prices. Find out how you can use this in your trading strategy here:https://t.co/kh5DZvv5ib $XAUUSD https://t.co/eJGODpfTNc
  • How can traders avoid #FOMO in trading? Start by implementing a well-heeled plan taking only four hours per week. Get your insight from @JStanleyFX here: https://t.co/vwUShQPc27 https://t.co/DoVBd1l1oO
  • #Silver is a precious metal commodity that investors use as an inflation hedge and safe-haven asset. Find out what are some strategies and tips to trade silver here: https://t.co/k4tVcFuwxW #CommoditieswithDailyFX https://t.co/zXCSmH2HLX
  • Markets are trying to maintain a bullish tilt as a new week rolls around, a look ahead at the charts of the #Dow, #DAX, and #FTSE. Get your technical analysis on major world indices from @PaulRobinsonFX here: https://t.co/bYjRDvQsdM https://t.co/mbg0rUbv3K
  • Trade conflict is clearly awful for the broad world economy, but some countries are already benefiting from it. More stand to do so. Spotting them early could be profitable. Get your update on the #tradewar from @DavidCottleFX here: https://t.co/og0VAPAqwm https://t.co/xB8hYUj4OA
  • #Gold prices may suffer if better-than-expected US economic data and progress on US-China trade negotiations cool 2020 Fed rate cuts and alleviate demand for anti-fiat hedges. Get your $XAUUSD market update from @ZabelinDimitri here: https://t.co/3ula2sUpqL $gld https://t.co/2iZwxcm3wP
  • What's the difference between leading and lagging indicators? Find out from @RichardSnowFX here:https://t.co/vGx8HCagF5 https://t.co/KCZ48rDnhy
  • Why financial market traders must monitor both monetary and fiscal policy? Find out from @MartinSEssex here: https://t.co/Fkzk88Y5gm https://t.co/tTXcw1b7Tp
  • RT @dlacalle_IA: ... “Temporary” Fed plans to double repo market intervention to avoid cash crunch https://t.co/j6N3Qmo6HX
Crude Oil Price Optimism May Be Short-Lived

Crude Oil Price Optimism May Be Short-Lived

2016-03-26 00:33:00
Natalie Huynh, Tyler Yell, CMT,
Share:

See how retail traders are positioning in the majors using the FXCM SSI readings on DailyFX's sentiment page

Crude oil price has stayed resilient during the past few weeks, despite occasional risk-off sentiment. Crude prices rose to their highest in three months in early March, at $42.49/barrel for WTI and $42.54/barrel for Brent. This was triggered by a combination of tightening supply, a proposed production freeze and a weaker US dollar. However, the November-December range of $44.16-$46.46 may act to cap higher development in WTI oil in the near term. Looking ahead, the April 17 Doha meeting to freeze output is a main event for the supply side, whereas demand growth from the main consumers may continue to slow down.

Crude Oil Price Optimism May Be Short-Lived

Chart 1. Source: International Energy Agency (IEA) via Bloomberg

Global oil supplies diminished by 180,000 barrels per day in February, according to International Energy Agency’s March report, although the pace of reduction has been painfully slow. Within the OPEC group, decreased output from Iraq, Nigeria and the UAE was offset by a rise in Iran’s production after sanctions were lifted. In the U.S., shale oil producers recently halted their cuts of active rigs, according to Baker Hughes Inc. This pattern will likely continue in the foreseeable future, unless an accord to freeze output is reached at the upcoming producers gathering. Qatar has successfully arranged a meeting among OPEC members and other major oil producers to cap their production at January’s levels, in order to reduce the supply surplus. At the time of writing, Qatar’s Minister of Energy and Industry confirmed attendance by 15 countries within and outside OPEC, with the self-exclusion of Iran and Libya. If this meeting does not come to fruition, similar recommendations would likely be discussed at OPEC’s semi-annual meeting on June 2.

Supplies from major producers have built up over the years, according to statistics by the International Energy Agency (chart 2). However as low oil prices take their toll on upstream investments, plunging supply growth could eventually lead to a price recovery.

Crude Oil Price Optimism May Be Short-Lived

Chart 2. Source: International Energy Agency (IEA) and OECD

On the other hand, demand growth has also decelerated due to uncertain economic conditions, as seen in the world’s largest consumers United States and China. At the March monetary policy meeting, the U.S. Federal Open Market Committee noted that economic activity had been expanding at a moderate pace, and although strong job gains pointed to additional strengthening of the labor market, business fixed investment and net exports remained soft. U.S. Markit Manufacturing Purchasing Manager Index (PMI) hit a two-year low in December 2015 and has hardly rebounded since. In China, the February Caixin/Markit Manufacturing PMI shrank to March 2014’s level as factory activities have struggled to improve since a multi-year low gauge last September.

Technicals: Inter-market Analysis & 200-DMA are Standing in the Way of a 61% Rally in Crude Oil Extending

Crude Oil Price Optimism May Be Short-Lived

Crude Oil prices have had a significant turn-around since WTI Crude Oil printed 26.03 on February 11. Since that low, Oil is higher by nearly 61% or $15.91/barrel as of the late March high of $41.90/barrel. In a month, Oil bears went from looking like market masterminds to fools because of the 60%+ rise. However, there is still much uncertainty as we approach the key chart-pivot of the 200-Day Moving Average that currently comes in at ~$42/barrel. The 200-DMA is where WTI Crude Oil has turned lower in June & October and is now verified as long-term chart resistance. Additionally, the US Dollar weakness that is negatively correlated to Oil could further support of the world’s most necessary commodity. Lastly, RSI (5) on a daily chart recently hit its highest level since early 2014, which may argue we’re getting carried away as we head into technical resistance.

Confluence of Technical Resistance in Focus for Q2 2016

As we head into Q2, eyes will turn to highly correlated markets as well as key levels on the charts to see if speculators continue to build bullish exposure as per the CFTC Commitment of Traders report. As of late-March, the 52-week percentile reading of Bullish bets stands at 73% meaning that we could continue to more bullish bets build. However, given the aggressive bullish move from the low, it’s easy to say that we will either see a retracement of much of the move or, at least, a smaller (in % terms) continuation higher on the back of possibly more US Dollar weakness. As the end of Q1 has us heading into the 200-DMA, 61.8% Fibonacci Retracement Level of the October-February Range, and Price Channel Resistance, the bullish outlook will continue to be favored above 35.94-34.25. This zone is comprised of multiple chart pivots, and a hold above this level should keep traders focused on the upside. Of course, the risk remains that we could see the fundamentals of eager producers bring back oversupply to service their debt-laden balance sheets, which could see the price move back in the direction of the February low. Those fundamental factors and/ or a US Dollar bullish reemergence would favor yet another move down from the 200-DMA in WTI Crude Oil.

Written by Natalie Huynh, Currency Strategist and Tyler Yell, Currency Analyst for DailyFX.com

Disclaimer

DailyFX Market Opinions

Any opinions, news, research, analyses, prices, or other information contained in this report is provided as general market commentary, and does not constitute investment advice. DailyFX will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Accuracy of Information

The content in this report is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. DailyFX has taken reasonable measures to ensure the accuracy of the information in the report, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the website, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this website.

Distribution

This report is not intended for distribution, or use by, any person in any country where such distribution or use would be contrary to local law or regulation. None of the services or investments referred to in this report are available to persons residing in any country where the provision of such services or investments would be contrary to local law or regulation. It is the responsibility of visitors to this website to ascertain the terms of and comply with any local law or regulation to which they are subject.

High Risk Investment

Trading foreign exchange on margin 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 foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain losses in excess of your initial investment. 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.

3

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.