Fundamentals: Oil prices jumped about 2 percent on Friday, with global benchmark Brent crude rising above $60 per barrel, on support among the world’s top producers for extending a deal to rein in output and as the dollar retreated from three-month peaks. Saudi Arabia and Russia declared their support for extending an OPEC-led deal to cut supplies for another nine months, the Organization of the Petroleum Exporting Countries’ secretary-general said ahead of the group’s next policy meeting on Nov. 30. The pact currently runs to March 2018. U.S. crude’s gains have lagged the global benchmark amid rising domestic output. Oil prices have been hovering near their highest levels for this year amid signs of a tightening market, renewed support this week of an extension of production cuts and tensions in Iraq. However, the announcement on Friday of a ceasefire between Iraqi forces and the Peshmerga from the country’s autonomous northern Kurdish region eased some concerns. The dollar trimmed its earlier gains versus a basket of currencies (DXY) following a Bloomberg report that U.S. President Donald Trump is leaning toward Federal Reserve Governor Jerome Powell as his pick to head the U.S. central bank.
Technicals:
I have published my forecast of the week, last week on Monday, and I have put a mark on the chart. And Crude Oil price has reached my target.
We have reached our targets one by one and generated quite nice profits.
I wrote few times, Crude is performing very well against strong DXY. Crude Oil price ended the week just at the resistance point of the channel.
54.42 and of course 55.25 – the highest of last two years – will be the next targets in mid-term. If the price breaks out 54.42 faster without fooling around, we may see the price testing 55.25 and 56.30 Fibo 161.80.
Another importing thing is if the market players take some profit from this level or they will wait for 55.25. In my opinion, everybody made the profit realisation at 51-52 USD levels.
The other dominant factor will Dollar Index. If we see a decline on DXY, we may see Crude Oil prices rise faster.
All pullbacks towards 49.60 are buying opportunities. Crude Oil prices will test 56.30 and 57.90 in short-mid term. Trend is the friend. Do not enter a trade against a trend.
Question as you are very knowledgeable about Fundamentals as well. How do you think the Mueller Investigation having their first set of charges being approved by the Grand Jury with first wave of arrests being made as early as Monday will affect the price of WTI?
eacemi
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@CyrusTrafford, Supply/ Demand, BDIY and BDIY/WTI, WTI/DXY are much more important Fundamentals to me than Muller Investigation.Sorry but I do not have any idea how Muller Investigation will affect the price of WTI.
bloomberg.com/quote/BDIY:IND. I watch BDIY, DXY on commodities trading. They are good enough for me. They send the initial signals. If you have an idea about how the Muller Investigation will affect WTI prices, I would happy if you could share with me.Thx.
CyrusTrafford
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@eacemi, Thanks for the tip with respect to BDIY, I will research this. Personally speaking I think it could be potentially bad news for the WHOLE MARKET now that the first set of arrests will be made on Monday. A Grand Jury would never authorise criminal charges presented by the Prosecution (i.e. the Special Counsel) if there wasn't a good probability that the suspects could be indicted. From what I have read, when it comes to White Collar Crime they start with people who they could potentially "flip" on Trump. My guesses that the first set of arrests to be made would be Paul Manafort (Trump's campaign manager) and Michael Flynn who served as the Head of the NSC (National Security Counsel) under Trump.
It's strange earlier in the week I was thinking that there was a lot of attacks from the Congressional GOP Leaders against Hillary Clinton/DNC about the Uranium One deal, then on Friday out of the blue top Judge Dana Boente resigned from the Justice Department, and that worries me because Former FBI Director James Comey came to Judge Boente about Trump...
My personal thoughts are the following: They released the news after the markets closed last night because it would give the chance for the Press to build the narrative up over the weekend on the Prime Time U.S shows. I can't see anything but a drop in the DXY when the market opens on Sunday night and that means WTI will fall. Since October 19th/20th (when the senate passed Trump's Tax Reform Budget) the DXY has been absolutely rampant and WTI has positively correlated to the DXY very closely. Usually the DXY and WTI have inverse correlation, i.e. price of dollar goes down WTI goes up and visa-versa. But since the 19th/20th Oct, the reason WTI has gone up with the DXY is because with the Senate passing through the budget (when they have had little success passing anything all year) was a big step forward in terms of Trump's Tax Reform becoming a reality. Now one could argue that if the DXY drops on Sunday evening, what's to stop WTI de-correlating there and then and carry on in this up-trend? That could certainly happen. However if the Dow Jones drops on Monday due to the news especially if the arrests made are top figures such as the ones mentioned above, the DJI, S&P, Russell 2000 etc. will all drop. This will then a 100% take WTI down.
I remember you saying once you were always long Gold, so you should have some profits.
But as I said, based on what I have mentioned above I would really appreciate your opinion if you have one, as I think you have a very good grasp on Fundamentals from what I have read you have posted before.
eacemi
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@CyrusTrafford, Thanks for the info. I will think about it and try to analyze. I quite agree with you on DXY/WTI correlation. As you said: "Usually the DXY and WTI have an inverse correlation. " That's why I wrote Crude is performing very well against the strong DXY. Fundamentally; the point which I don't agree with you is if the things go in a way as you said and DXY falls ( I rate this scenario 7 /10 ) I predict the correlation between DXY and WTI will turn to its "usual" way and it will support WTI prices. However, technically I see a bearish cypher pattern on the chart which can cause a 3-4 USD decline on WTI prices this week. But I still believe that 58.-USD will be tested midterm. Long term, I do not believe those levels of oil prices are normal. 35-45 USD region is quite reasonable. Today I have published an article about DXY, JPY and GOLD. I wrote that markets can be opened with GAPs. One of the reasons were political situation in Spain. I still do not understand why but JPY has a strong safe-haven perception. I am expecting a decline in all JPY crosses in favour of JPY and upward move on XAUUSD. I keep my eyes on the news from Spain. Now, combining your "case" and mine, I can say that a funny week is waiting for us. In mid-long term, my favourite currency is GBP and of course GOLD. Thanks for your comment.
CyrusTrafford
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@eacemi, Thanks for your opinion. I do actually agree with you that if there is ever-time for the de-coupling of the DXY and WTI, it could be on the 1st Nov when the FOMC meet. The market has priced in a Rate Hike for December but the extremely Bullish Q3 GDP results on Friday could potentially mean that Rate Hike being brought forward to Wednesday. Outside possibility. So if that happens I believe WTI could start to fall because the Debt-Repayments become much more expensive for E&Ps... That said we have Brent Expiry tomorrow so again we will see a lot of Profit-Taking and I expect a re-tracement tomorrow to at least 53.50. Short's in place as I type this from 54.09.
I TOTALLY agree with you with respect to the Yen especially with the whole North Korea situation. I remember the evening North Korea launched a missile that flew over Japan, I was just about to go to bed, and I told my girlfriend I will just have one look at my positions before I do, and I saw a HUGE Red Candle on my long USDJPY position. And it was after U.S markets had closed, and Asian Markets hadn't opened yet, so I thought for a move of that magnitude it must be Macro-related. Then I searched on Google and low and behold North Korea had launched a missile test. I mean I get the thesis, that because a lot of Japanese Money is invested overseas, and in uncertain times the Japanese Investors will pull their money back to Japan, leaving a shortage of Yen in the marketplace. But if the target is Japan itself and they get hit, surely the Japanese Investors would want to send as much of their money overseas as possible? This is why I feel Bitcoin will become the number one Safe Haven in time...
Good Luck for the week, and I look forward to reading more of your work. Great Job
@CyrusTrafford your "Mueller Case" started to work and my bearish pattern on Crude Chart worked also... And good for my GOLD positions :-) As I said, we will have an interesting week. Have a nice evening.
CyrusTrafford
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@eacemi, A combination of TA and FA at it's best :) Also Vixx is rallying nicely today, currently up approx. 4%. I have also heard on the grapevine (big rumour though) that the Corporate Tax Rate Cut maybe staggered, so companies would only get the full 20% cut in the Corp. Tax Rate cut by 2022. If that's the case the market reaction to that would almost certainly be bearish.
P.s. started looking into Baltic Dry Index last night, very interesting and I can see why you use it as an indicator. Also the positive correlation between DXY and WTI today has weakened somewhat. Have a good evening