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Crude Oil Prices in Jeopardy Ahead of OPEC JMMC Meeting

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Crude oil chart

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Crude Oil Fundamental Forecast: Bearish

  • Crude oil prices are at risk of breaking lower on the back of the IEA’s downbeat outlook on global demand.
  • However, shrinking American crude stockpiles may limit the potential downside for oil prices in the near-term.

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The outlook for crude oil prices remains fragile, according to the International Energy Agency, given that “the trajectory for Covid-19 infections is strongly upwards in many countries and governments are tightening restrictions on the movements of their citizens”.

In its Oil Market Report for October, the Paris-based intergovernmental organization revised down its demand estimates for the third quarter of 2020 and stated that although a draw of 4 million barrels per day in inventories could be seen in the fourth quarter, this significant reduction “is happening from record high levels”.

Moreover, “with the 1.9 mb/d increase in the OPEC+ production ceiling currently planned for January 1, there is only limited headroom for the market to absorb extra supply in the next few months”.

OPEC Crude Oil

Data Source – Bloomberg

This may concern crude oil buyers in light of the resumption of oil production in Libya, with the nation currently exempt from the cuts OPEC and its allies imposed in April this year and expected to produce up to 500,000 barrels a day.

However, shrinking American crude stockpiles appear to be counterbalancing concerns of an impending supply glut, after the Energy Information Administration (EIA) reported that US inventories had shrank by a larger-than-expected 3.82 million barrels in the week ending October 9th.

That being said, tightening restrictions in several European nations may intensify selling pressure in the near-term, as the International Monetary Fund reports that “more stringent lockdowns are associated with lower consumption, investment, industrial production, retail sales, purchasing managers’ indices for the manufacturing and service sectors, and higher unemployment rates”.

DOE US Crude OIl Production vs Crude OIl Prices

Data Source – Bloomberg

The French government has announced a curfew on residents of nine of the country’s biggest cities while British Prime Minister Boris Johnson announced that restrictions will tighten in London starting this coming weekend.

Therefore, deteriorating global health outcomes may continue to hamper the performance of crude oil ahead of OPEC’s Joint Ministerial Monitoring Committee (JMMC) meeting on October 19.

— Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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Markets Week Ahead: Dow Jones, US Dollar, Stimulus, GBP, Brexit, EUR, ECB, JPY, BoJ

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Global market sentiment remains fragile heading into a busy week. The Dow Jones and US Dollar eye ongoing fiscal stimulus talks as the election nears. GBP/USD remains glued on Brexit negotiations. …



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XAUUSD Coils Ahead of Next Big Break

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Gold Price Forecast Talking Points:

  • Gold prices remain in a falling wedge pattern that’s been building for more than two months.
  • Ahead of this recent digestion, Gold prices were breaking out with aggression, setting a fresh all-time-high in early-August. Are bulls waiting to drive that next break?
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Last week saw Gold prices tease a bullish breakout. But, buyers stepped back before a re-test of the prior October high and, so far, Gold prices have continued in the digestion backdrop that’s become commonplace over the past two months.

As looked at last week, Gold prices remain in a falling wedge pattern after the bullish breakout drove through the August open. This isn’t the first time that Gold prices have formed a falling wedge during this recent bullish cycle, as similar scenarios presented itself in Feb-May of last year and then again from September-December. Such formations will often be approached with the aim of bullish breakouts, begging the question as to whether or when buyers might be ready to resume the bigger picture trend in the yellow metal.

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To learn more about falling wedges, check out our DailyFX Education section.

Gold Daily Price Chart

Gold Daily Price Chart

Chart prepared by James Stanley; Gold on Tradingview

Gold – Deeper Support Potential

On a shorter-term basis, there could be scope for a deeper pullback while that longer-term wedge remains in-play. Price action in Gold appears to be slipping below the bottom-side of the 1900-1920 zone, and underneath price action is another area of possible support running from 1859-1871. This zone is what helped to catch the low in early-August, and came back into play in late-September. Prices in Gold could dip down to this zone while still remaining above the September swing-low; setting the stage for another run at resistances of 1900, 1920 and eventually 1933 (the October swing-high).

Top Trading Opportunities in 2020

Top Trading Opportunities in 2020

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Gold Four-Hour Price Chart

Gold Four Hour Price Chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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How Will the Election Affect the Stock Market? Dow Jones Forecast

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Dow Jones Price Outlook:

  • Data from the last ten Presidential elections reveals the Dow Jones Industrial Average typically climbs around an election
  • Still, it is difficult to attribute any equity strength to an election singlehandedly as an infinite number of themes are at play in the market at any given time
  • Dow Jones: A True Cross Section of American Industry?

How Will the Election Affect the Stock Market? Dow Jones Forecast

Global stock markets have been on a wild ride in 2020 thus far, juggling the coronavirus and the various monetary and fiscal decisions central banks and governments have made in response. If a global pandemic were not enough, the Dow Jones, Nasdaq 100 and S&P 500 will have to negotiate a looming Presidential election – an event that frequently dominates media and popular culture in the lead up. While it may feel like the election and its social implications can take over everyday life, what impact has it had on the stock market in the past?

Dow Jones Performance in the 12-Months Before and After a Presidential Election

dow jones price chart in election years

Data Source: Bloomberg. Compiled by Peter Hanks

With the assistance of data from the last ten US Presidential elections, history reveals the stock market – more specifically the US benchmark Dow Jones index – typically rises on average before, during and after an election. That being said, there are a few caveats for which we must account. First and foremost, stocks generally rise over time in general, with the 30-year annualized return of the S&P 500 at roughly 8%. Similarly, the 30-year annualized return of the Dow Jones is slightly more than 5%.

Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities

With that in mind, seeing the Dow Jones rise modestly on average across ten presidential elections is not entirely surprising. To that end, drawing such conclusions from only a limited sample of data is presumptuous. Consequently, the saying that ‘past performance is not indicative of futures results’ is very apt for circumstances such as this where statistics cannot assure better equity performance than a non-election year.

Top 8 Forex Trading Strategies and their Pros and Cons

As displayed in the graph above, some years are dominated by themes other than the Presidential election. 1996, 2008 and 2020 are just three instances whereby external influences like the ballooning of the Dot-Com Bubble, the Great Financial Crisis and coronavirus respectively have (or are currently) exerted as much or more influence than the changing of the guard in the Oval Office – although the coming election may surprise yet.

Suffice it to say, 2020 has proven to be anything but ordinary and external factors like trade wars, monetary policy and the pace of the pandemic recovery may all have varying degrees of influence over the stock market. Further still, the trajectory of these themes could be altered significantly after the election – possibly changing the shape and scope of an issue like US-China relations or technology regulation. Undoubtedly then, stocks will have their hands full in the coming months and it is difficult to say that Presidential elections are a positive development for equities.

VIX futures price chart

One theme we can attribute to an election with more confidence is an increase in volatility. Elections and their potential impact on government and fiscal policy can create uncertainty – a phenomenon most investors detest. With uncertainty often comes volatility and this volatility can be observed in the October VIX futures contract as it reflects the lead up to the election. In the subsequent months’ contracts, the assumption of volatility in VIX pricing steadily declines as the election impact fades into the rearview.

Trading Forex News: The Strategy

Trading Forex News: The Strategy

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Trading Forex News: The Strategy

Thus, it can be surmised that an election’s impact on stock prices would inevitably fall with a general trend of strength, but expecting an increase in volatility may be the more likely outcome. As the election draws closer and potential policies are given more clarity, specific sectors may rise or fall depending on the forecasted outcomes. Healthcare, energy, technology and companies with sensitivities to US-China relations may all be subject to fundamental changes after the election.

Stocks like Amazon, AbbVie and Zoom are just a few examples of those with potentially heightened sensitivity to changes in the US administration, while corporations like Caterpillar, Boeing, Lulu and Walmart may be more closely aligned with the pace of economic recovery. Evidently, various themes to be negotiated around the election are already at play and divergent performances are likely.

S&P 500 price chart by month and vix price chart

Data source: Bloomberg. Compiled by John Kicklighter

With increased volatility to boot, these moves could see their magnitude increased regardless of direction, especially as trends in seasonality exacerbate election uncertainty. With the election drawing ever-closer, 2020 surely possesses the catalysts to differ from the typical election-year and trading opportunities are abound as a result. As the election nears, check back at DailyFX for election coverage from a macroeconomic perspective.

Open a demo FX trading account with IG and trade currencies that respond to systemic trends.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX





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