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Euro Shaken but No Trend from ECB, Oil Prices Rally on Supply Drop

Euro Shaken but No Trend from ECB, Oil Prices Rally on Supply Drop

2016-09-09 02:15:00
John Kicklighter, Chief Strategist
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Talking Points:

  • A hold by the ECB shook the Euro and risk trends despite anticipation as monetary policy skepticism grows
  • Oil posts most impressive move on the day after US supply update craters - temporary or permanent?
  • Event risk through the final trading day should keep Pound, Euro and Canadian Dollar traders on alert

Harness the power of big data to evaluate millions of historical price points to calculate the probabilities of short-term market moves using the GSI Indicator.

High-level event risk continues to generate attention and even volatility, but general market conditions are difficult to override. The financial system is still favoring congestion and range as limitations in participation and conviction undercut the ability to run. These restraints where in full view with the ECB rate decision this past session. Considering the ECB is arguably one of the most aggressive policy authorities in the world, its effort and credibility present a distinct influence over the Euro; but it is also a considerable driver of universal risk trends beholden to global stimulus. Both currency and equities fluttered after the expected hold, but no trend was provided for.

In contrast to the high profile monetary policy event, expectations for the weekly US oil inventory figures set low expectations. Yet, a massive surprise in these statistics this past session provided more lift for crude prices than would otherwise be expected in these otherwise restrained conditions. A nearly 4.5 percent rally on the day (close to close) for the commodity showed what volatility alone can provide. The biggest weekly drop in US oil supplies in 15 years gave a more tangible foothold to a rally that has been charged so far on rumor alone. Yet, even this move will struggle for follow through given the oppressive environment and dubious source of the supply draw.

Ahead, we should keep an eye on Dollar and risk measures (Yen crosses, equity indexes, etc) as well as potential for Euro and commodities. The depth of potential in the former offers dramatic potential if not the highest probabilities. For scheduled event risk through the final session of trade this week; the Pound, Euro and Canadian Dollar are most at-risk - or opportunity laden, depending on how you view and trade it. UK trade will give a critical check to Brexit authorities, the EU will be discussing the UK divorce from its own perspective and Canadian employment is a well-known market mover with the correct level of surprise. We discuss this market movement and potential in today's Trading Video.

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