Home » Oil » Recent Articles:

Weekly review… If you thought last week was dull you were right

March 25, 2012 Weekly Market Review No Comments

If you were thinking to yourself what a dull week it was in EUR/USD you were correct. The weekly range of just 160 pips made it the 3rd lowest for the pair since 2007. The good news might be that the two previous worst weeks ( narrowly) were followed by ranges of 350 and almost 500 pips. Hopefully then a 2 or 3% move next week.

What I have to concede is that the Euro put in a good performance the dollar poor considering events. The week saw equity markets softer ( down 3% in Europe) . While that weakened the likes of the Australian dollar EUR/USD was up a 100 pips on the week at 1.3265. The Yen conformed a little better regaining some risk averse status and closing firmer at USD/JPY 82.40 and EUR/JPY 109.30.

Looking to where we might go next week it I am wondering if the Euro may take some strength from the latest French opinion polls where President Sarkozy has edged into a lead. He is now showing a 2% lead over Socialist candidate Hollande ( 30% against 28% in first round voting) where previously he lagged. Its early days but it appears Sarkozy played it right during last weeks events in Toulouse . It looks like perhaps issues of immigration and the like may dominate over the economy which would certainly play into Sarkozy’s hands more.

With Hollande committed to renegotiating the new EZ budget pact and previously seeming a clear favourite the possibility that Sarkozy could yet make it will do the Euro no harm.

In terms of technical resistance EUR/USD 1.3290 to 1.3320 remains key on the upside and if we do challenge and break that we could see a move higher to 1.3480/90 really squeezing a few shorts. I cannot see much beyond that and will look to sell close by. On the downside a move below 1.3130 will merely keep us in the range, below 1.30 is a tougher level.

There is not much in the way of market moving data, possibly Eurozone CPI, to watch although a G7 meeting and EU discussions might prove more interesting. Aside from that its stock and bond markets and month end stuff to keep an eye on.

The peace and quiet around Greece has meant a lull in Eurozone tensions. Further out there is already chatter on a 3rd bailout for Greece a 2nd for Portugal and rising concerns over Spain. Italian pm Mario Monti voiced concern over Spain when speaking yesterday. He is rightly worried that bigger problems there will knock Italian bonds. Italy seems to be finally enacting some meaningful labour reforms ( cabinet approval on Friday) although its not all plain sailing- The architect, Welfare and Employment minister Else Fornero was apparently spotted shopping in Turin last week with an entrage of police and body guards. She is obviously conscious of previous efforts to free up Italian labour where reformers were shot.

Timing is the key in forex trading and fundamentals may not always determine moves. The Euro and the Yen will at some stage lose ground , if the opposite happens short term their economic plight will be even greater and the currency fall even harder.

Oil still remains a vital ingredient in how events turn out and with that regard of course Iran is the catalyst. If they are playing the game to the brink then anything is possible. Israel seems to be gearing up for action ,possibly within months unless Iran makes concessions. Oil at $150 will smash economic growth where there is some and within Southern Europe probably push economies over the edge. The US now far less reliant on imported Oil will suffer less. Inflation or stagflation for some could set in leaving the ECB with a huge credibility problem.

As we approach the ´sell in May and go away’ season for equities it might just be a good call.

Last weeks PMI data in Europe and China was poor. While Chinese growth may yet fail the 7,5% target its a downward spiral Greek style that will worry many European politicians. Spain is definitely the one to watch.

Headlines

China… PMI data fell to 48.1 from 49.6 in March staying in contraction and adding to concerns of sluggish export demand and withering domestic demand
EZ…. Eurozone manufacturing PMI fell to 47.7 in March from 49. Falls in Germany and France were lower also on contraction raising fears of a greater slowdown
QE.. Comments from various Fed officials and Bank of England minutes show that further QE is still possible although is very much splitting opinion
Bernanke… Was encouraged but cautious on the US economy where domestic consumption has been the main driving force recently.
UK.. A neutral budget which left sterling much the same. The UK remains head above water as far as growth is concerned but shackled by softer European growth
Italy.. The Italian cabinet approves labour market reforms
Elections… Nothing to headline but expect elections in Greece and France to dominate over the coming weeks. Both offer the potential for more Eurozone tensions

Wednesday update… UK in the spotlight today

March 21, 2012 Daily Comment No Comments

With Bank of England minutes and more importantly the budget speech from Chancellor Osborne it should be sterling in the spotlight today. Mind you as far as the budget goes as is the norm these days most of the major decisions seem to leaked. It looks reasonably market friendly and will keep the UK on its deficit cutting track. The idea of informing tax payers where their money goes( that’s every individual) would be a good idea everywhere.It should be reasonably sterling friendly although as I said not much that isn’t already known. USD/GBP is close to 1.59 and a decisive break could propel it higher. ( just popped over but no follow through as yet)

Elsewhere it was a score draw for the US dollar although it has slipped a little overnight. EUR/USD hit EUR/USD 1.3282 and trades close by. A bit like sterling it has heavy resistance just over 1.33 which likewise if overcome might see us close to 1.34.

Equity markets were better in Europe yesterday but flat elsewhere. It seems that stock markets are uncertain at these levels requiring some catalyst for a new surge or sell-off which may well determine the dollars fortunes short term.

Headlines

Greece…Greek parliament approved the 2nd international bailout… Hardly a surprise
US… Bernanke testimony… Not sure if he made it or another leak but nothing new and made reference to Europe´s problems, eased but not over seems the conclusion
US… Bernanke dismissed any return to the Gold standard as there is just too little gold around….. Or maybe too much money Ben so stop printing it
Oil… Off a couple of dollars yesterday as the Saudis say they have up to 25% excess capacity… Well why not turn the taps on a little now to ease the pressure
Oil.. Merkozy speaking as one again dismissed calls for releasing oil reserves

French terror.

It seems mercifully that the tragic killings may be over with a suspect surrounded. Al Qaeda are in the frame with the young man having been arrested in Afghanistan previously. It remains to be seen what political fall-out there might be with a possible boost for the national front at Sarkozy´s expense.