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Crude Oil Bulls Have a Banner Week As Reasons To Be Long Multiply

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Crude Oil Bulls Have a Banner Week As Reasons To Be Long Multiply

Fundamental Forecast for USOIL: Bullish

Talking Points:

Crude oil was at the epicenter of geopolitical risk last week due to Yemeni missiles heading for Riyadh being intercepted and US President Trump threatening a barrage of missiles toward Syria. In a change of events, the reduction of trade war threats was replaced with possible real war, which was a concoction that caused oil bulls to bid the commodity market to the highest levels since 2014 and pushed WTI Crude closer to $70/bbl.

Volatility Now Brings Upside Price Risk That Also Includes Inflation Risks

Crude Oil Bulls Have a Banner Week As Reasons To Be Long Multiply

Data source: Bloomberg

Traditionally, volatility is accompanied by downside price shocks. As you can see above, 2-month realized volatility spiked when price bottomed in early 2016. However, recently we’ve seen 2-month realized volatility at the highest levels of the year with price pushing to the highest levels since December 2014.

The increase in crude oil is incredibly important as it often brings inflation behind it as a key macro development. Inflation has been called the silent killer of bull markets that appears to be making a comeback with a perfect storm seems to set up commodities as Goldman Sachs said this week that the case for owning commodities has rarely been this strong.

Additionally, OPEC said its output fell to the lowest in a year last month while the IEA has said demand remains on track with previous estimates. This combination suggests global markets are poised to tighten sharply, which could exasperate the upside and extend backwardation.

Also, with all the talk about at a US yield curve on its way to inversion, traders should also note that the previous two recessions were foretold by a surge in crude oil prices.

Future’s Spread Backwardation Shows Buying Pressure at 4-Year High

Time spreads of futures contracts are one of the purest ways to get a pulse on the demand to buy now or later. When a front-month contract trades at a premium to a later dated contract, known as backwardation, the implication is that the benefits to hold due to either supply shortage or increasing demand outweighs the costs to hold such as storage, insurance, etc.

Recently, the backwardation on the Brent December 2018-December 2019 contract traded to the strongest level in almost 4-years with the Dec. 2019-Dec. 2020 also showing an expanding backwardation as the market draws support from geopolitical risks and OPEC-led supply cuts.

Crude Oil Bulls Have a Banner Week As Reasons To Be Long Multiply

Data Source: Bloomberg, Chart created by Tyler Yell, CMT

There’s a global rise in oil demand! Click here to see our Q1 forecast on what outcomes we’re watching!

Technical Focus for Crude Oil – Bullish Resumption despite Highest Level in 3 Yrs.

Crude Oil Bulls Have a Banner Week As Reasons To Be Long Multiply

Chart Source: ProRealtime, IG UK Price Feed. Created by Tyler Yell, CMT

The technical focus on WTI Crude Oil remains bullish as WTI looks destined to test the 100% Fibonacci extension off the 2017 low at $70.16/bbl. Only a break below the supporting trendline would open up a likely test of the 200-DMA at ~$56/bbl.

Bears who continue to focus on some of the bearish fundamentals such as record-high US production and possibly slowing demand can keep an eye on Ichimoku (applied to the chart above) for evidence that a catalyst may have brought their views into play. For now, with the price above the Ichimoku cloud, WTI looks to have room for another leg up.

Learn how to utilize Ichimoku Cloud in our FREE guide here

If you want to see Ichimoku Analysis in action, check out my new report, Ichimoku Charts that Matter

Next Week’s Data Points That May Affect Energy Markets:

The fundamental focal points for the energy market next week:

  • Monday: Kuwait Oil & Gas Summit, Kuwait City with speakers including OPEC Sec.-Gen. Barkindo
  • Monday: EIA’s Monthly Drilling Productivity Report
  • Tuesday 04:30 PM ET: API issues weekly US Oil Inventory report
  • Wednesday 10:30 AM ET: EIA issues weekly US Oil Inventory Report
  • Wednesday: JODI Issues World Oil exports, output data
  • Thursday: API Monthly Statistical Report
  • Thursday: OPEC’s Joint Technical Committee meets in Jeddah, Saudi Arabia
  • Friday: OPEC’s Joint Ministerial Monitoring Committee meets in Jeddah, Saudi Arabia
  • Friday 1:00 PM ET: Baker-Hughes Rig Count
  • Friday 3:30 PM ET: Release of the CFTC weekly commitments of traders report on U.S. futures, options contracts

Crude Oil Insight from IG UK Client Sentiment:Contrarian view of retail positioning favors bullishness

Crude Oil Bulls Have a Banner Week As Reasons To Be Long Multiply

Source: IG UK Client Sentiment Readings on DailyFX

Oil – US Crude: Retail trader data shows 35.5% of traders are net-long with the ratio of traders short to long at 1.82 to 1. The number of traders net-long is 9.2% higher than yesterday and 10.2% lower from last week, while the number of traders net-short is 4.6% lower than yesterday and 36.0% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil – US Crude prices may continue to rise.

Discuss this or other markets you’re trading with me below!

—Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell

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Forex

DAX & CAC Technical Outlook – More Strength Ahead?

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DAX/CAC Technical Highlights:

  • DAX yet to show signs of reversing despite resistance
  • Big-picture topping potential remains
  • Strength has the CAC trading in ‘open space’

Check out the DailyFX Q2 Forecasts for the DAX, CAC, Euro, and other major markets; see how our Trading Opportunities for 2018 doing too – DailyFX Trading Guides.

DAX yet to show signs of reversing despite resistance

The DAX rally off the lows found opposition last week after a slight breach above a swing-high in February and just below the 200-day MA, however; the reversal sparked only very minor selling. Yesterday’s turn back higher has the market geared up to take on the 200-day and better.

On a breakout above the 200, a thorough testing of the underside of the double-top from November-January should be in play. The zone extends from 12745 up to the mid-12800s and is likely to prove problematic. How problematic, we’ll need to wait and see.

Should we see a strong rejection, then we’ll perhaps flip the script to a short bias, but if it is anything like what we saw this past week, then we’ll need to respect the trend off the March low. There is still the possibility that we see a long-term top develop should we see a strong turn down in the weeks ahead.

We’ll delve more into the ‘head-and-shoulders’ top scenario at a later time should it become relevant. If this scenario is to come to fruition, it’s worth noting that the DAX shouldn’t climb too much higher from current levels.

See this guide for 4 ideas on how to Build Confidence in Trading.

DAX Daily Chart

DAX daily chart with price levels

Strength has the CAC trading in ‘open space’

Of the two big Euro-zone indices, the CAC has been an absolute monster off the late-March low. Nothing has provided any real opposition, not the 200-day MA, not the late-Feb swing-high. Looking higher, there isn’t much preventing the index from trading higher towards the January high, 2007 trend-line.

This doesn’t mean the index will necessarily get there without set-backs, or at all, but as far as quality price levels to lean on, resistance is difficult to come by. As long as we don’t see a strong turnabout in momentum, the benefit of the doubt remains with the long-side. Support first clocks in at the Feb swing-high around 5363.

Heads up, the ECB meets on Thursday. For live coverage, you can join my colleague Nick Cawley at 11:30 GMT time.

CAC Daily Chart

CAC daily chart

Forex & CFD Trader Resources

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

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Key Reversal Targets 2017 Slope Support

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The British Pound has fallen more than 3% off the yearly highs with the decline taking out the April opening range lows. While the broader outlook does remain constructive, near-term the risk for a pullback in price has us looking for a possible exhaustion lower down near structural support.

GBP/USD Daily Price Chart

GBP/USD Price Chart - Daily Timeframe

Technical Outlook: In my last Weekly Technical Outlook we noted that Cable was approaching the 2018 highs at 1.4346 with a breach above this threshold needed to keep the broader long-bias in play. Price posted an outside-weekly reversal off this threshold before break below the objective April opening range lows yesterday. The decline also validates a break of the November slope line and leaves the risk lower while below the monthly open at 1.4024.

Note that yesterday’s close marked the fifth consecutive daily decline – three of the last five instances of such an occurrence saw a slight reprieve (a day or so) before registering a new low. That said, look for initial support along the lower parallel.

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GBP/USD 240min Price Chart

GBP/USD Price Chart - 240min Timeframe

Notes: A closer look at price action sees Cable trading within the confines of a near-term descending pitchfork formation extending off the March highs with this week’s decline slipping below the monthly range lows / 61.8% retracement at 1.3965. IF this break is legit, topside advances should be capped by the weekly highs / monthly open resistance at 1.4024/31. A break lower from here targets the lower parallel / 100-day moving average at 1.3854/67 with broader bullish invalidation for the multi-year uptrend at the March low-day close at 1.3775.

Why does the average trader lose? Avoid these Mistakes in your trading

Bottom line: The British pound has broken below the monthly opening range but looks like the decline may be losing some steam here near-term. From a trading standpoint, we’ll favor fading strength while below median-line of the descending pattern with the decline to ultimately offer more favorable long entries near long-term slope support.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

GBP/USD IG Client Positioning

GBP/USD Client Sentiment

  • A summary of IG Client Sentimentshows traders are net-long GBPUSD- the ratio stands at +1.33 (57.0% of traders are long) – weak bearishreading
  • Long positions are 15.2% higher than yesterday and 83.1% higher from last week
  • Short positions are 0.5% lower than yesterday and 42.6% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!

Relevant Data Releases

GBPUSD Economic Calendar

Other Setups in Play

– Written by Michael Boutros, Currency Strategist with DailyFX

To receive Michael’s analysis directly, sign-up to his email distribution list

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

https://www.dailyfx.com/forex/education/trading_tips/daily_trading_lesson/2017/06/09/Introduction-to-Basic-Pitchfork-Median-line-Analysis.html?ref-author=Boutros



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Respect New Uptrend For Now

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Talking Points:

  • The ASX 200 is climbing again
  • Range trade has given way to a new upside channel
  • That channel will take it up to 6000, however, and there bulls should probably worry

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The ASX 200 broke out of its ascending channel to the downside mid month, but price action since suggests that its subsequent consolidation may have been mere prelude to another upward foray.

The index has been admittedly rangebound since, trading between. April 16 and 17’s intraday low of 5831.1 and the intraday high of April 23 and 19 at 5904.9. At the time of writing (0100 GMT Tuesday) that range is history, if only just with the index a bare half dozen points above the top.

ASX 200 Technical Analysis:  Respect New Uptrend For Now

If it can close above there, then the 5934-5971 region last traded in mid-March could form the next target for the bulls. However above that the 6,000 level beckons and that barrier has proved too much for the index so often, both in the recent past and, indeed, for the past decade, that it’s probably wise to expect plenty of cashing out should it get there again.

Downside support may come in at the base of a new, nascent uptrend channel, which is at 5857.8 on Tuesday. Below that there is likely to be a cluster of near-term props forming in sum a band between April 10’s highs around 5848 and April 2’s closing low of 5686.

ASX 200 Technical Analysis:  Respect New Uptrend For Now

Still the uptrend should probably be respected for the moment, with the ASX currently in the middle of it. The Sydney stock benchmark’s simple moving averages fail to suggest anything obviously amiss, with the 20-50- and 100 day version in rank order and nicely spaced. The index’s Relative Strength Index is nudging higher, as you’d probably expect given the nice little run-up seen this month. However at a stolid 59 it doesn’t suggest any vicious overbuying.

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!



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