Sunday, 4 December 2016

30.11.2016 FXTM Analysis - It’s all about OPEC

FXTM Research Analyst Lukman Otunuga comments on the failure to secure an effective deal today could ensure oil remains depressed for prolonged periods with price levels below $35 becoming a reality in the medium to longer term:

A strong feeling of anxiety has gripped the financial markets this week with investor jitters rising as uncertainty over OPEC securing a meaningful freeze deal in today’s Vienna meeting weighs heavily on global sentiment. The many anomalies revolving around the deal continues to send ominous warnings while repeatedly conflicting reports of major oil producers cooperating and debating have left most market participants on edge. With the cartels credibility hanging on a thin line and the oversupply concerns intensifying by the day, OPEC has more to lose than gain from failing to secure a deal but can major producers decipher this logic? While there still remains a thick layer of uncertainty over today’s OPEC outcome, it may be certain that Oil is exposed to explosive levels of volatility as investors systematically offload and reload positions to be in the winning trade.

WTI Crude is heavily pressured on the daily time frame and a breakdown below $45 could open a path lower towards $43. A failure to secure an effective deal today could ensure oil remains depressed for prolonged periods with price levels below $35 becoming a reality in the medium to longer term.

US ADP report in focus 
The Greenback edged slightly lower on Tuesday with the Dollar Index hovering above 101.00 as investors took profit ahead of Wednesday’s heavily anticipated OPEC meeting. With expectations cemented over the Federal Reserve raising US rates in December, bullish investors still remain in control with the Dollar expected to remain buoyed. Some attention may be directed towards the ADP Non-Farm Employment Change which should act as an appetizer ahead of Friday’s NFP report. A strong ADP may encourage bulls to propel the Greenback higher during trading today.

Currency spotlight – EURUSD
The Euro continues to be battered by the painful combination of Eurozone growth concerns and fears of political instability in Italy. Tuesday’spositive stance from the ECB pledging to buy more Italian bonds post Italian referendum did little to quell the downside pressures on the EURUSD with bears exploiting this opportunity to send prices lower. Mario Draghi is due to speak about the future of the European economy in Madrid today with any dovish hints of extending QE in December enticing bears to attack. A resurgent Dollar amid the heightened US rate hike expectations could ensure the EURUSD concludes the year in losses.

From a technical standpoint, prices are bearish on the daily timeframe as there have been consistently lower lows and lower highs. A breakdown back below 1.060 could open a path lower towards 1.050.

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