ACY Market Analyst

[ACYAustralia]

Crude rebounded for a fifth straight day and recovered all losses from last week. It surged on Wednesday 2.76 percent or $1.23 per barrel, to end at $44.694 as concern over a supply glut eases.
Oil slumped into a bear market last week on concerns that physical oversupply and increases in U.S. inventories would undermine a deal of output cuts from the OPEC (Organization of Petroleum Exporting Countries). A data from the Energy Information Administration showed that U.S. crude inventories remain more than 100 million barrels above the five-year seasonal average, which drove oil prices down.
According to the EIA, inventories that remained stubbornly high dropped 894,000 barrels last week, with Oklahoma inventories (the largest delivery stock in US) falling for the sixth straight week, while U.S. crude oil stockpiles rose by 118,000 barrels, the amount of oil held at the Cushing hub fell for the sixth week in a row. Declined U.S. gasoline stockpiles boosted futures (5.5 percent) over the past five sessions on Wednesday.
“The positioning clearly says there is room for a fairly abrupt reversal,” said Mike Wittner, head of oil market research at Societe Generale SA, adding that this will depend on signs the market is re-balancing. “The gross short positions are very big. Sentiment is overwhelmingly bearish right now, but things can turn around in a hurry.”
Technically in the near term oil prices is moving in a descending price channel, which is depicted in blue below. After touching a support level of the lower channel line the price got a sharp bounce and now is testing the 20-day moving average, which is seen as a key resistance. In the event of crude prices edge higher to break the MA20, there is a large room for traders to see further increases towards MA60. Alternatively if prices reverse lower impeded by the MA20, it will decline further to test Jun 21st’s low of 41.822.
If we see the longer term’s outlook, it is still staying in an upper upward price channel after finding a median line support. A brighter future can be seen if it is not breaking lower to this support line with rising Relative Strength Index (RSI) which is now standing around at median level.


Chart 1: WTICOUSD Daily



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[ACYAustralia]

The yen bounces back strongly for a third straight day to partly erase the weekly loss against the U.S. dollar. The intraday price of USD.JPY slumps 0.35 percent or 0.387 points to ￥111.785 yen as of 12:20 p.m. in Sydney largely for the reason that the U.S. dollar suffers a massive drop in these days.

The dollar remains its defensive steps compared with nine of its G-10 peers as their central banks are considering to start following the Federal Reserve in shifting higher interest rates and then the financial market promptly recalibrates position.

The USD’s tumble was mainly driven by a hawkish voice of both the ECB’s President Mario Draghi and BOE’s Governor Mark Carney. Just a week after saying that near-zero interest rates were appropriate, Carney suggested the time is nearing for an increase on Wednesday’s speech. Meanwhile, his Euro-zone counterpart Draghi noted that euro-zone’s economy is on the way to recovery after a decade of easy money policy and his speech had been interpreted as signalling an imminent change in current ultra-loose monetary policy. However, the Fed’s chair Janet Yellen showed a dovish voice though her policy tightening is still on track.

“The market is very sensitive to the idea that a number of central banks are appropriately and belatedly reassessing the need for emergency policy accommodation,” said Alan Ruskin, co-head of foreign exchange research at Deutsche Bank AG.

Unlike his counterparts who are set to keep the foot on the pedal of monetary stimulus, the Bank of Japan governor Haruhiko Kuroda highlighted Japanese economy continues to strengthen, but inflation is still weak, which is far away from its 2 percent target and wages and investment remain subdued. The BOJ has pushed central-bank activism further than its peer, with having an active control of the yield curve by buying massive bond for more than four years.

Recent data of Japan shows a positive outlook for its economic growth, with both changes in Overall Household Spending and Industrial Production last month were beating their forecasts and previous statistics, at -0.1 percent and 6.8 percent respectively. However, National CPI in May remained unchanged compared with previous at 0.4 percent, and unemployment rate even rose to 3.1 percent.

Technically for the long-term period, the USD/JPY remains consolidated in a daily descending price channel after touching a key resistance found at the upper channel line with the Relative Strength Index (RSI) sharply decreasing. In the event of successful breakout of the resistance, the U.S. dollar tends to rise further following the upward channel depicted in red according to chart 1.



Chart 1: USDJPY Daily

If we try to predict the future movement of the USD/JPY through an indicator of Fibonacci retracement, 112.239 (61.8% retracement) is seen as a key resistance which impeded its further increase. If it breaks higher to 61.8% retracement, it more likely moves towards 114.364 (100% retracement). Alternatively if it reverses lower, 111.578 (50% retracement) can be seen as a support level for the price.



Chart 2: USDJPY Daily – Fibonacci


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[ACYAustralia]

The loonie continued to lose its value for a fifth straight day on Friday from the high record since the July of 2015, and fell 1.7 percent against the U.S. dollar last week but is still up nearly 9 percent since early May.
With some positive signs that U.S. employers hired more workers than expected in July and raised their wages, the greenback rallied against a basket of major currencies last week. Rise in hiring data in July along with stronger household incomes and buoyant consumer confidence may put another plan of raising interest rates later this year conducted by the Federal Reserve into schedule as it seeks to normalize monetary policy.
Additionally good performance of change in non-farm payrolls which was beating the forecast propelled the recent growth. Although the corrective bounce in the U.S. dollar is happening, markets still show questioned about its long-term growth as President Donald Trump’s policy agenda has run aground.
The value decline of loonie can be seen as a corrective rally in the U.S. dollar, pushed mostly from the greenback side in relation to the U.S. jobs data. Jobs data showed that Canadian labor market starts to tighten, as Canada's economy added 10,900 jobs in July, mostly in full-time employment, Statistics Canada said, while the jobless rate fell to its lowest since October 2008.
The currency's strongest level of the session was C$1.24332, while it touched its weakest since July 18 at C$1.2667. Helped by the Bank of Canada raising interest rates last month for the first time in nearly seven years, the loonie surged more than 9 percent since early May.
Oil prices are one of Canada’s major exports and are playing an important role in its GDP, rising on Friday but were down on the week, pressured by rising OPEC exports and strong U.S. output.
The USD/CAD declined slightly by nearly 0.1 percent to C$1.26342 as of 12:05 p.m. in Sydney. Technically with a sign of rising Relative Strength Index (RSI) of 44.8623, the USD/CAD is consolidating in a daily developing ascending channel. It may cease to rise after touching a key resistance found at a descending 20-day moving average.
In the event that the USD/CAD breaks lower propelled by MA5, traders should first watch for the pair to decline further. Alternatively if prices continue to edge higher, the USD/CAD must first break above Friday’s high of 1.26674, then test the ascending channel line near 1.26815.
When we analyse by Fibonacci retracement, 1.27370 (23.6% retracement) could be seen as another resistance if the pair continues to rise.



Chart 1: USDCAD Daily



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