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It was all about the blockbuster move in Oil on Thursday, with the energy instrument right at the epicenter of the moves that unfolded in currencies, bonds, equities, credit and volatility (VIX, MOVE indices).
The President tipped CNBC that he was about to tweet a market-moving announcement in which he took pride of ‘brokering’ a potential re-conciliation between the Saudis and Russians for an eventual 10-15 mbpd oil productions cut. It was a wild ride from there, with Brent almost 50% up at one stage before the dust settled.
The deal is still conditional to the Saudis finding sufficient solidarity by other OPEC members, hence a lot of questions are still up in the air. Saudi Arabia called for an emergency OPEC+ summit seeking guarantees that other countries will join in.
After all said and done, the CAD and NOK were the out-performers, with the USD showing fortitude too. JPY was the most punished by the bid caught by equities. A currency that continues to impress is GBP, the clear dominant of buy-side flows in the G8 FX complex in the last 7 days. In contrast, the EUR and CHF succumbed for a 2nd day in a row, while the Oceanic currencies are still putting up a fight.
The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.
Narratives In Financial Markets
* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Twitter, Institutional Bank Research reports.
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Oil rallies hard on hopes of a cut in production
Oil skyrocketed over 20% after tentative signs that there is going to be some sort of production cut as Trump announced that he managed to ease the strained relations between Russia and the Saudis. So far, the talk indicates that a cut of 10m barrels a day is on the table. News of China looking to increase its strategic oil reserves aided the Oil move.
Trump’s tweet lifting the oil deal prospects
Trump tweeted: “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!…..Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!”. Saudi Arabia wants an emergency OPEC deal as long as other nations join in.
US jobless claims total 10M in two weeks
US jobless claims showed another blockbuster number following the rise to a record 6.65 million last week, never seen before in history. Filings totaled 10 million in two weeks. As Bloomberg reports, a jobless rate of 20% ‘not unthinkable’ as shutdowns multiply. Up to 6% of the workforce has filled for benefits in such a short span.
USD & equities find solid bids
The USD remains one of the best performers this week, even if the Pound and Canadian Dollar put up a fight. The latter was one of the main beneficiaries, together with the Norwegian Krone, over the encouraging Oil news that also sparked a rally in equities, especially in the energy sector. The S&P 500 ended up just shy of 2.5%.
Time for the US Non-Farm Payrolls
It’s time for the US Non-Farm Payrolls tonight, but as the team at the National Australian Bank notes, “we are unlikely to see a large impact on Payrolls tonight given the payroll pay period is the period including March 12, which pre-dates the rise in jobless claims.” Besides, they also argue that “the survey period for the jobless rate also pre-dates the rise, with the household survey referencing the week of March 8-14.”
When will the lockdown really end?
In an article published by the Research Team at ING, Analysts argue that based on their modelings, “some countries in Europe may try to end lockdown measures at the end of April.” However, they warns that those suffering large-scale infections, “won’t be in a position to ease back restrictions on travel and movement until the end of May/June (or later for the US).” Lastly, they detail that “a true return to ‘normality’ probably won’t come until the end of the year.” Here is a supplementary chart on when to expect a lift in restrictions.
S&P reaffirms US At AA+, Outlook Stable
The US credit rating is safe as per the latest update by S&P. As stated late on Thursday, “the ratings reflect its diversified and resilient economy, extensive monetary policy flexibility, and unique status as the issuer of the world’s leading reserve currency. The ratings are constrained by high general government debt and fiscal deficits, both of which are likely to worsen this year following the economic shock caused by the coronavirus pandemic, before moderating over the next three years. The outlook remains stable, reflecting our expectation that unprecedented fiscal and monetary stimulus will limit the economic downturn and set the stage for recovery in 2021.”
COVID has infected 1 million people across the world
The latest global developments in the coronavirus front indicates that
cases have now topped 1 million with more than 50k deaths. The number of deaths in Spain have surpassed the 10k mark as frustration continues about test kits shortage all over the Western hemisphere. The latest intelligence reports indicate falf the world on lockdown.
VIX to keep adjusting lower?
After the Fed went “all in”, expectations for US bond volatility, as indicated by the MOVE index, which measures U.S. interest rate vol, collapsed to pre-COVID levels. What this most likely implies is that if history is any indication, the VIX should gradually be adjusting lower too in order to reflect the relaxation of vol in bonds.
Recent Economic Indicators & Events Ahead
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Insights Into Forex Flows
This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.
Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.
Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.
It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.
The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection