Fed Preview: Dollar could be at a turning point if Powell capitulates

The Fed is expected to deliver a second consecutive rate cut in what is still technically considered Powell’s mid-cycle adjustment.  The big question for market participants is whether the Fed will commit to more cuts.  The bond market is still screaming for more cuts to come, with the yield on 10-year Treasuries still well below the Fed funds target range.

–          Optimism growing for Powell to deliver a dovish cut
–          Will it be an extended mid-cycle adjustment or an easing cycle?
–          Fed’s Repo move signals more easing tools may be on their way

Recent Fed speak from Rosengren, Williams and Kaplan have dampened easing cycle bets, but weakness in the labor market is starting to appear, manufacturing is trending lower, and declining confidence, support calls for a much more accommodative stance.  The Fed will also have to look at their peers and decide do they want to disrupt a global wave of easing efforts that is trying to fight off a global slowdown and fend off deflationary pressures.

If Powell focuses on firming inflation and maintains his reluctance to signal a steady flow of rate cuts and openness to QE down the road, the dollar could surge across the board.  If Powell emphasizes the downside risks to the economy and delivers a dovish cut, we could see the punchbowl argument support US equities to make a run at those recent record highs.  Further accommodation is likely warranted to thwart off the geopolitical risks that include trade wars, tensions in the Persian Gulf, and even Brexit.

Repo Madness
The Federal Reserve Bank of New York was forced to take action on Tuesday after risks grew that rates were about to exceed the Fed’s 2.25% upper end of the central banks’ target range.  The NY Fed bought $53.2 billion of securities in a repo operation.  The sudden surge in the overnight rate on Treasury repurchase agreements meant there was not enough cash to come out of money markets and rates jumped over 8%.  This problem shows there is some weakness in the mechanism for setting rates.  This probably bolsters the case for the Fed to also cut the IOER rate tomorrow.  The Fed is losing control of dictating rates and if we see continue to see a glut in collateral, the Fed may be forced to introduce a new tool that aims to equalize collateral and reserves.   The other way of fixing this problem would be too deliver enough rate cuts to steepen the US yield curve.

Dot Plots
This Fed meeting could be a turning point for the doves to emerge.  The downside risks could warrant some members committing to delivering a few more 25 basis-point cuts, with a majority at least supporting one more cut by year end.  The hawkish members of the committee have voiced their concerns, which could mean they are ready to capitulate in joining the doves.  They could justify a few more rounds of rate cuts to reduce inversion pressures on the yield curve, but once that is in order and the economy is on firming footing, they can return to tightening.

EUR/USD could fall to fresh 2019 lows if Powell disappoints

Many investors are expecting a massive dollar move following the Fed rate decision.  If Powell and company disappoint the rising dovish expectations that market has firmly priced in, we could see euro fall back to the 1.09 lows that were made after the ECB announced their plans for more QE.  A dovish cut that solidifies more rate cuts and possibly QE are down the road could help propel EUR/USD towards 1.1200 handle.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏

Ed Moya

Ed Moya

Oil prices sink on report Saudi output will recover quickly after weekend attack

Oil futures dropped sharply on Tuesday, after registering one of the sharpest rallies on record a day earlier, following a report that output from Saudi Arabia will be quick to recover from weekend attacks on major crude facilities which disabled more than half of the kingdom’s daily crude production level.

The Saudis are close to restoring 70% of the 5.7 million barrels per day production lost after the attacks, Reuters reported, citing a top Saudi source briefed on the latest developments. The source also said output will be fully back online in the next two to three weeks.

“The good news is production will be back on line. What he did not say is how they are going to stop these drone and missile attacks in the future,” said Phil Flynn, senior market analyst at Price Futures Group.

The kingdom’s energy minister Price Abdulaziz bin Salman will hold a news conference at around 8 p.m. local time (1 p.m. Eastern time) to provide an update on the situation with the oil facilities, Reuters report, citing the media ministry.

West Texas Intermediate crude for October delivery CLV19, -5.31% the U.S. benchmark contract, was down $3.22, or 5.4%, at $59.69 a barrel on the New York Mercantile Exchange, after the largest daily gain for the most-active contract since Sept. 22, 2008, according to Dow Jones Market Data. WTI finished Monday’s session at its loftiest level since May 21, 2019.

November Brent crude BRNX19, -5.23% lost $3.22, or 4.7%, to $65.0 a barrel on ICE Futures Europe, following the international benchmark contract’s sharpest percentage gain on record and its biggest dollar rise since June 6, 2008.

Monday’s price spikes in both Brent and WTI crude oil came after a Saturday attack on Saudi Arabia’s Abqaiq plant and its Khurais oil field, which has thrown offline an estimated 5.7 million barrels of the kingdom’s crude oil production a day. Saudi Arabia has enough oil in storage to make up the lost production for about 30 days, but it may take weeks or months to repair the damage to the processing plant and oil fields.

U.S. intelligence on Monday said evidence points to Iran as the source of the Saudi attacks, which officials from Tehran have denied. However, a somewhat softening stance from the U.S. and Saudi, in terms of military responses, may cool a run-up in crude prices, even if it takes longer for Saudi production to return online.

“I don’t want war with anybody,” said President Donald Trump on Monday, in response to questions from reporters during a press conference in the White House with the Crown Prince of Bahrain.

Those comments were in contrast to statements on Monday from U.S. Secretary of Energy Rick Perry and U.S. Secretary of State Mike Pompeo, who both definitively pointed the finger at Iran for the attack on Saudi’s energy infrastructure. Moreover, the Wall Street Journal on Monday reported that U.S. intelligence indicated that the Saudi attack originated in Iran, with a combination of a drones and missiles. Saudi officials, however, have indicated that there isn’t enough evidence to implicate Tehran definitively.

“The shock loss of 5% of global crude production has markets focused on how soon Saudi Aramco can bring back production and if we will see the US or other countries use their respective strategic reserves,” wrote Edward Moya, senior market analyst at brokerage Oanda.

“The latest update shows Saudi Aramco’s initial calculation on the damages may have been too optimistic and some customers expecting early October deliveries will likely see shipments later in the month,” he wrote.

Back on Nymex, October gasoline RBV19, -3.83% fell 4.9% to $1.6671 a gallon and October heating oil HOV19, -3.61% shed 4.5% to $1.9903 a gallon.

October natural gas NGV19, -0.07% traded at $2.661 per million British thermal units, down 0.8%.

CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏

Ed Moya

Ed Moya

US Open – Aramco Update, Focus shifting to Fed, US-Japan trade progress, Gold trims gains

If we don’t see any major geopolitical developments today, we could see a lackluster moves in US equities and the currency markets. The focus is tentatively shifting back to the Fed and markets are nervous that the sudden rise with oil prices could derail some dovish bets.

The aftermath of the worst disruption to world oil supplies on record saw oil prices tentatively ease from their recent highs as traders try to determine the longer-term impact of the drone attacks on Saudi Arabia’s oil facilities.  The shock loss of 5% of global crude production has markets focused on how soon Saudi Aramco can bring back production and if we will see the US or other countries use their respective strategic reserves.  The latest update shows Saudi Aramco’s initial calculation on the damages may have been to optimistic and some customers expecting early October deliveries will likely see shipments later in the month. 

Crude prices will also closely react to how Saudi Arabia and the US will retaliate with Iran.  The base case remains for a tit-for-tat response, which could mean strategic strikes, but not a full-blown military war.  The Kingdom seems set on securing global support and the situation will remain tense over the next couple of days as UN investigators will look to confirm where the drones. It is unlikely we will see any action from the Saudis until forensics teams are completely done with their assessments. It seems that WTI clean break of its stubborn 3-month range of $50-60 a barrel will be major support that could see an eventual test of the $70 level. 

Fed

Today, the Fed begins their two-day policy meeting and markets are widely expecting a 25bps rate cut this week, with the dot plot falling, as Fed Chair Powell struggles to maintain his case for a mid-cycle adjustment.  Powell will probably reiterate the Fed will do what it can to sustain the expansion and that will keep the possibility for QE to be announce over the next couple meetings if one of the major geopolitical risks blows up. 

The job market is starting to show some weakness, the global slowdown is not showing any signs of stabilization and Treasury curve is not in order.  At the very least, we should see a 25bps cut tomorrow and one more either in October or December.  Markets are starting to get used to Powell’s policy mistakes and we will be surprised if he ever decides to be preemptive in delivering stimulus.  You get a better bang for your buck if you start strong and if he stumbles into an easing cycle, he will be criticized for taking so long and losing some policy effectiveness. 

US-Japan Trade

It seems President Trump is not taking any chances with a third lingering trade war.  The Trump administration signaled they are close to an initial trade accord over tariffs with Japan.  A deal is expected over the coming weeks, but as markets have seen before with China, nothing is done until it is signed.  Japan is adamant that they do not want Trump to slap any new tariffs on $50 billion of Japanese cars. 

Gold

Gold is not holding onto its weekend gains as well as oil as market participants take off some positions ahead of the Fed meeting.  Gold is set to rip higher if Powell does not deliver a policy mistake tomorrow.  He needs to deliver at least a 25bps rate cut, not dismiss QE is a possibility, and the dot plots need to fall down enough to convince markets we are in an easing cycle. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏

Ed Moya

Ed Moya

European open – Fed, Saudi Arabia, oil, gold

Markets tread water ahead of Fed

Equity markets are mixed on Tuesday as traders continue to piece together the events in Saudi Arabia over the weekend and speculate on Wednesday’s Fed decision.

Source – Thomson Reuters Eikon

The Fed’s two day meeting starts today and the result may not be the foregone conclusion it looked even a week ago. Expectations have changed quite dramatically in recent sessions, to the point that a 50 basis point is no longer priced in at all and no change is now priced at more than 30%. A 25 basis point cut is still almost 70% priced in but the way markets are moving at the moment, this could slip further over the next 24 hours.

There have been a variety of explanations for the change in expectations, be it stronger data last week, improved risk appetite, trade war optimism and even higher inflation potential following the oil price spike. Whatever the reason, it would be an interesting move from the Fed to hold at the meeting and one that would almost certainly draw the ire of President Trump, although they must be used to that by now.

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Oil stabilises and holds onto huge Monday gains

Oil prices have stabilised on Tuesday after surging at the start of the week on the back of the attacks in Saudi Arabia. We’re now seeing a significant risk premium being priced into the oil markets, not only because of the outages caused but also the prospect of further attacks and an escalation in the region.

It’s clear who the US believe is to blame for the attack, despite the Houthi rebels claiming responsibility but how they respond is yet unknown. We’ll also learn in the coming days just how quickly the Saudi’s can get lost production back online and whether stocks will be called upon to fill the void. There’s a lot of unknowns at the moment which is why we’re seeing oil holding onto these gains.

Brent Daily Chart

OANDA fxTrade Advanced Charting Platform

Gold has lost its mojo

It’s been a telling 24 hours for gold, which initially benefited from its safe haven status in the immediate aftermath of the Saudi attack before giving up much of the gains to end the day below $1,500. Gold has looked overbought for some time and weaknesses are starting to show, making $1,480 support look very vulnerable.

This makes the Fed decision tomorrow all the more interesting given the direction of travel of market positioning. A refusal to cut rates will be supportive for the dollar and could pull the rug from under the feet of gold, taking $1,480 with it. It may take something very dovish from the Fed to give gold its mojo back and I just don’t see it happening.

Gold Daily Chart

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Commodities Weekly: Oil surges as Saudi output hit

 

Energy prices are higher on rising geopolitical tensions with precious metals also in demand on safe haven plays. Industrial metals are under-performing on weak China data while the agricultural sector was lifted by reports of China agreeing to buy US agricultural produce as part of the ongoing trade negotiations.

 

Energy

CRUDE OIL prices surged at the start of the week following the weekend drone attack on Saudi oil production facilities, which cut off about half of the Kingdom’s daily production, the equivalent of 5% of global supply. The Kingdom has is said to be on track to restore half of the lost production, but recovering the balance could take weeks. US President Trump said the US Strategic Petroleum Reserve, which currently stands at 660 million barrels, would be made available to ensure supply and calm markets.

Russia’s Energy Minister reckons that global oil reserves will be sufficient to cover the shortfall from Saudi Arabia’s lost production, and said yesterday that there is probably no need to convene an emergency OPEC+ meeting.

Prices jumped the most on record yesterday before closing 12.8% higher. The 78.6% Fibonacci retracement of the April-August drop is at $63.045 and had capped prices on a closing basis for now.

 

WTI Daily Chart

Source: OANDA fxTrade

Speculative investors, including hedge funds, were well positioned for the move higher, having increased net long positions for the first time in three weeks to September 10, boosting net long positions to the highest since the week of May 28, according to the latest data from CFTC.

 

NATURAL GAS prices rose to the highest since April 11 yesterday as oil prices surged, flirting with the 200-day moving average at 2.6785 for the first time since January 25. Anticipated higher temperatures across the US in the September 23-29 period was already lifting prices before the Saudi Arabia news, lifting prices for three straight days.

The recent rally has seen speculative investors scaling back net short positions for the last four weeks, and they are now at the lowest since the week of June 18. Last month, China’s natural gas output increased 6.6% y/y to 13.8 billion cubic meters.

 

Precious metals

GOLD has started the week positively amid safe haven buying and is facing its first up-week in four weeks. Despite the surge in oil prices and heightened geopolitical tensions, gold only managed a 1.5% rally at the most yesterday and is now back below the 1,500 mark. The 55-day moving average has been rising since June and is now at 1,471.86.

The lack of upward momentum through 1,560 has seen many speculative investors lose patience, so net long positions have been scaled back to the lowest level in six weeks, according to data as at September 10 from CFTC. Exchange-traded funds (ETFs) have also been selling the precious metal for the past five days, with the last session seeing the biggest amount sold since August 13,according to Bloomberg reports yesterday.

 

SILVER rebounded from three-week lows yesterday amid heightened geopolitical tensions. The metal jumped the most in two weeks, which pulled the gold/silver (Mint) ratio off three-week highs. The ratio is shying away from the 200-day moving average at 86.20. Speculative investors turned net sellers of silver for the first time in four weeks, CFTC data to September 10 show.

 

PALLADIUM touched a new record high yesterday before closing lower for the second day in a row. In the run up to the record high, palladium had posted six consecutive weekly gains, the longest run since June/July 2016. Speculative investors have been embracing the rally, increasing net long positions to the highest since July 30, according to the latest CFTC data as at September 10.

 

PLATINUM declined for the first time in four weeks last week and seems to be extending those losses into a second week. Speculative investors are still bullish however, boosting net long positions for a third straight week and lifting them to the highest in 18 months in the week to September 10, CFTC data show.

Wage talks between producers and South Africa’s largest platinum-mining union have been deadlocked for more than a week, with the producers seeking independent arbitration, which could have a negative impact on supply going forward.

 

Base metals

COPPER prices fell the most in more than four months yesterday after China’s August industrial production data came in at the lowest level in more than 15 years. This raised concerns about future demand for the industrial metal and saw prices retreat from seven week highs. Speculative investors, including hedge funds, trimmed their net short positions for the first time in three weeks in the week to September 10. They are now the least since the week of July 30.

 

Copper Daily Chart

Source: OANDA fxTrade

 

Agriculturals

CORN’s three-day rally into yesterday was the longest bullish run since July, pulling prices to the highest level this month amid speculation that ethanol demand, of which corn is a main ingredient, might pick up if the oil production outage in Saudi Arabia continues for some time. Speculative investors have been wrongly positioned for this latest upmove, having been net sellers for the past eight weeks, turning net short on the commodity last week for the first time since May.

 

SUGAR rose for a second consecutive day yesterday and, if these gains can be maintained throughout this week, could be facing its first up-week in eight weeks. Prices had touched a near one-year low last Thursday amid concerns about excess supply. Rains are forecast for India’s sugarcane growing areas for most of this week, which could benefit crops that are due to be harvested next month, potentially adding to supply.

Speculative accounts remain bearish on sugar, with net short positions now at the highest on record after six straight weeks of net selling.

 

SOYBEANS posted the biggest weekly gain of almost 5% last week, the most since June, amid reports that China had agreed to buy more US agricultural products as part of the trade war negotiations. Prices hit the highest since July 25 yesterday and look poised for a fourth consecutive day of gains today. Speculative investors boosted net short positions to the highest since the week of June 11.

 

WHEAT has been flirting with the 55-day moving average, now at 4.8320, for the past three days but has failed to sustain any break above it. Within a 4.8233 to 4.8320 range we have three moving averages converging. The 55-day at 4.8320, the 100-day at 4.8236 and the 200-day at 4.8233. With prices now at 4.8210, the resistance may be a tough level to crack in the near term.

 

Wheat Daily Chart

Source: OANDA fxTrade

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Waiting for the FOMC’s good oil

Prepared by Jeff Halley, Senior Market Analyst

 

Drowned out in a glut of oil headlines overnight, the FOMC two-day meeting starts today in the United States. As well as a slowing global economy made worse by the U.S.-China trade war, the Federal Reserve rate-setting committee now has to contend with the possibility, of sharply escalating tensions in the Middle East and the ramifications of possible shots being fired across the Straits of Hormuz.

The FOMC meeting will almost certainly concentrate on the bigger economic picture instead, and not get itself involved in the political chest-thumping sweeping the globe. The data from the United States is frankly, not that bad, but the Federal Reserve will not want to be caught wrong-footed and behind the curve, so to speak. Tomorrow’s rate decision will almost certainly be another 25 bps cut, but the critical factor will be whether it is another “mid-cycle adjustment,” or a move to an output easing bias.

The former will undoubtedly incur the wrath of the U.S. president who thinks rates should be negative now. That said, he seems to be angry with everyone. The latter will almost certainly set off a wave of new easings by other central banks, as the United States had been the last man standing in the global slowdown. It will be particularly the case with emerging and developing markets, most of whom run some sort of USD peg or pseudo peg against their currencies. No export-driven country is going to want to lose market share in a contracting international market because their currency was too high against the dollar.

It will be a blessing in disguise that China is in the midst of a trade conflict with the United States. The big boy of the developing market grouping has precious little room to move on the devaluation front because of it and will have to let those annoying free-market forces do the job more gently for it. To be fair to China, they have been a rock of stability in times of trouble such as the late 1990’s Asia crisis, when they would have been entirely within their rights to jump on the competitive devaluation bandwagon.

The dollar bears waiting in the wings for the FOMC, may get their wish if the committee cuts and Mr Powell changes to an easing bias. That feeling of “I told you so” probably won’t last however as the rest of the world continues easing. As the dust settles, the realisation will be, that despite an easing bias, the United States will still have the highest interest rates in the G-10. Far away from the $15 trillion oil slick of negative-yielding sovereign debt floating on the ocean of the world’s capital markets. Dollar strength is likely to persist for the rest of 2019, even after the FOMC gives us the good oil on the future direction of U.S. interest rates.

I have been asked extensively over the last 24 hours about my most significant worry for global oil markets from here following the gulf-war like jump in prices yesterday. Both Brent crude and WTI is holding their gains to finish 13% higher overnight. The answer is, of course, military retaliation against Iran. The satellite photos of the attack show a strike of military precision and execution, not the work of a group of poorly equipped rebels 600km away in the mountains of Yemen.

The U.S. President has accused Iran of being the perpetrator. The Saudi’s though, have been silent, with no concrete evidence yet offered. Despite the circumstantial evidence, I feel the barrier of proof would have to be very high indeed. Almost impossibly so as there are zero appetites in the world for a military conflict with Iran. A more likely course of action is a ramping up of sanctions on Iran. The chances of a military response by either Saudi Arabia or the U.S. are low. What is clear is that Saudi Arabian oil infrastructure is more vulnerable than thought, and a risk premium will be built into oil prices going forward.

Equities

Wall Street finished lower overnight but only modestly so. Energy stocks soared while airlines and transport, unsurprisingly, suffered. The S&P 500 fell 0.30%, the Nasdaq fell 0.28%, and the Dow Jones fell 0.53%. The Australian ASX is flat as we await the return of Japan from a public holiday yesterday. The Nikkei is likely to move lower, reflecting yesterday’s price action elsewhere.

The rest of Asia will likely open steady having led the falls yesterday, preferring to look ahead to a probable easing by the FOMC tonight. The street will be vulnerable to Saudi Arabia related headlines following the chaos of yesterday.

Currencies

The dollar strengthened overnight in a broad-based but orderly rally with the dollar index climbing 0.27% to 98.62. Investors rotated out of G-10’s and EM currencies to the greenback on Middle East tensions and the possibility of military escalation there. A war, or the possibility thereof, almost always elicits a dollar rally, morbid as that may sound.

Regional currencies will remain under pressure today as investors continue to reassess their risk parameters following the weekend’s events in Saudi Arabia and ahead of tomorrow’s FOMC decision.

Oil

Both Brent Crude and WTI finished 13% higher in New York, holding onto the majority of their Saudi Arabia inspired gains from the start of trading in Asia yesterday. Brent Crude is trading at $68.20 a barrel and WTI at $62.00 a barrel as Asia’s day commences.

The 5.7 million barrels of production taken offline by the weekend’s attack can, for now, be met by reserves in storage. What is not clear is how long the Akqaiq complex will offline. Saudi Arabia is the world’s only major swing producer, able to ramp up production by millions of barrels at short notice. Most of the other spare capacity, unfortunately, is in Iran and subject to sanctions. It has also carried the weight of most of the OPEC+ production cuts.

With the rest of the world producing at near-maximum capacity, another supply shock in the near-term would have material implications for the price of oil. The attack also highlights the vulnerability of Saudi Arabia’s oil infrastructure. For these reasons, oil prices are likely to remain elevated and may get another boost tomorrow if the FOMC moves to an official easing bias.

Gold

Gold rose 0.70% to 41499.00 an ounce overnight having reached as high as $1512.00 an ounce in the panic of yesterday morning’s Asia session. The failure to close above $1500.00 will disappoint bulls as the Saudi Arabia attacks are the bread and butter of gold rallies.

A rapid de-escalation of the Middle East situation may not be kind to gold given its underwhelming rally overnight. The FOMC moving to an easing bias may also be, to some extent priced in meaning a non-rate cut decision could see long positioning sharply reduced.

The $1480.00 an ounce area continues to be critical support and could be threatened post a disappointing FOMC. That would open up the $1450.00 area. On the topside, resistance appears at $1512.00, the overnight high, and $1530.00.

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Daily Markets Broadcast 2019-09-17

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Daily FX Turnover Reaches $6.6 Trillion in BIS Triennial Survey

OANDA Corporation is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission and is a member of the National Futures Association. No: 0325821. Please refer to the NFA’s FOREX INVESTOR ALERT where appropriate.

OANDA (Canada) Corporation ULC accounts are available to anyone with a Canadian bank account. OANDA (Canada) Corporation ULC is regulated by the Investment Industry Regulatory Organization of Canada (IIROC), which includes IIROC’s online advisor check database (IIROC AdvisorReport), and customer accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request or at www.cipf.ca.

OANDA Europe Limited is a company registered in England number 7110087 limited by shares with its registered office at Tower 42, Floor 9a, 25 Old Broad St, London EC2N 1HQ and is authorised and regulated by the Financial Conduct Authority, No: 542574.

OANDA Asia Pacific Pte Ltd (Co. Reg. No 200704926K) holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore and is also licenced by the International Enterprise Singapore.

OANDA Australia Pty Ltd is regulated by the Australian Securities and Investments Commission ASIC (ABN 26 152 088 349, AFSL No. 412981) and provides and is the issuer of the products and/or services on this website. It’s important for you to consider the current Financial Service Guide (FSG), Product Disclosure Statement (‘PDS’), Account Terms and any other relevant OANDA documents before making any financial investment decisions. These documents can be found here.

OANDA Japan Co., Ltd. First Type I Financial Instruments Business Director of the Kanto Local Financial Bureau (Kin-sho) No. 2137 Institute Financial Futures Association subscriber number 1571.

BNN Bloomberg with OANDA discussing the Saudi oil facility attack

OANDA Corporation is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission and is a member of the National Futures Association. No: 0325821. Please refer to the NFA’s FOREX INVESTOR ALERT where appropriate.

OANDA (Canada) Corporation ULC accounts are available to anyone with a Canadian bank account. OANDA (Canada) Corporation ULC is regulated by the Investment Industry Regulatory Organization of Canada (IIROC), which includes IIROC’s online advisor check database (IIROC AdvisorReport), and customer accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request or at www.cipf.ca.

OANDA Europe Limited is a company registered in England number 7110087 limited by shares with its registered office at Tower 42, Floor 9a, 25 Old Broad St, London EC2N 1HQ and is authorised and regulated by the Financial Conduct Authority, No: 542574.

OANDA Asia Pacific Pte Ltd (Co. Reg. No 200704926K) holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore and is also licenced by the International Enterprise Singapore.

OANDA Australia Pty Ltd is regulated by the Australian Securities and Investments Commission ASIC (ABN 26 152 088 349, AFSL No. 412981) and provides and is the issuer of the products and/or services on this website. It’s important for you to consider the current Financial Service Guide (FSG), Product Disclosure Statement (‘PDS’), Account Terms and any other relevant OANDA documents before making any financial investment decisions. These documents can be found here.

OANDA Japan Co., Ltd. First Type I Financial Instruments Business Director of the Kanto Local Financial Bureau (Kin-sho) No. 2137 Institute Financial Futures Association subscriber number 1571.

Oil explodes higher (video)

OANDA Corporation is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission and is a member of the National Futures Association. No: 0325821. Please refer to the NFA’s FOREX INVESTOR ALERT where appropriate.

OANDA (Canada) Corporation ULC accounts are available to anyone with a Canadian bank account. OANDA (Canada) Corporation ULC is regulated by the Investment Industry Regulatory Organization of Canada (IIROC), which includes IIROC’s online advisor check database (IIROC AdvisorReport), and customer accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request or at www.cipf.ca.

OANDA Europe Limited is a company registered in England number 7110087 limited by shares with its registered office at Tower 42, Floor 9a, 25 Old Broad St, London EC2N 1HQ and is authorised and regulated by the Financial Conduct Authority, No: 542574.

OANDA Asia Pacific Pte Ltd (Co. Reg. No 200704926K) holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore and is also licenced by the International Enterprise Singapore.

OANDA Australia Pty Ltd is regulated by the Australian Securities and Investments Commission ASIC (ABN 26 152 088 349, AFSL No. 412981) and provides and is the issuer of the products and/or services on this website. It’s important for you to consider the current Financial Service Guide (FSG), Product Disclosure Statement (‘PDS’), Account Terms and any other relevant OANDA documents before making any financial investment decisions. These documents can be found here.

OANDA Japan Co., Ltd. First Type I Financial Instruments Business Director of the Kanto Local Financial Bureau (Kin-sho) No. 2137 Institute Financial Futures Association subscriber number 1571.