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Oil prices surge 4% after two tankers attacked in the Gulf of Oman


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ANALYSIS

USDCAD

Dollar/CAD is giving back half of yesterdays gains this morning as crude oil prices surge 4% higher in response to a suspected attack on two tankers in the Gulf of Oman. Moreherefrom Gulf News. While the tankers werent carrying crude oil and reports are still coming out as to what happened, fears are growing that the finger might get pointed at Iran and geopolitical tensions will rise once again. OPEC warned that trade tensions are hurting global oil demand, when it released its monthly report earlier today, but traders seem to be ignoring this for now. The cartel, which is still having trouble finalizing the date for its next meeting, revised its 2019 demand growth forecast lower to 1.14M bpd from 1.21M last month and chopped 2019 demand for its crude specifically from 30.58M bpd to 30.52M. The July WTI contract has completely reversed yesterdays losses from bearish US inventory data and now sits back above chart support in the 52.50-60s. Dollar/CAD, like clockwork, has pulled back here after testing the upper bounds of the 1.3315-1.3330 we tweeted about yesterday. Todays NY session doesnt feature any major economic data and so traders will likely focus on this developing story out of the Middle East. Were not surprised to see sellers on strength this week in USDCAD as the overall market trend has shifted lower. We think USDCAD could break support at 1.3300 and quickly resume lower should July crude oil prices make a run for the $54 level. Should oil prices settle down however, we think USDCAD could very well chop around in the low 1.33s until the US Retail Sales report tomorrow.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JUL CRUDE OIL DAILY

JUL CRUDE OIL DAILY


EURUSD

Overnight trading in EURUSD has been rather lackluster as oil market headlines dominate the air waves. What is interesting though is we havent seen any risk-off flows related to this Gulf of Oman incident (gold and JPY steady). The S&Ps futures are actually trading higher, which makes no sense to us. In other news, the EUs Moscovici said Europe is ready to move forward with disciplinary procedures over Italian debt if there no new commitments from Rome, but Italian bond traders don't seem concerned in the slightest today. Were seeing some selling in EURUSD here as GBPUSD knee jerks lower in reaction to the first round of ballots in the UKs Tory leadership race (more below). We think EURUSD may struggle here into the US Retail Sales report tomorrow as yesterdays slip below chart support in the 1.1310s was not a great technical development. The next key support level lies in the 1.1270-80s, below which there is not much else until the 1.1240s.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

USDCNH DAILY

USDCNH DAILY


GBPUSD

The first round of ballots have been cast in the race to become the next UK prime minister, and Boris Johnson appears to have an overwhelming lead (he received 114 votes vs 84 expected by the media). This vote is the first of a series of votes to eliminate candidates with the least support from the Tory party membership. According to ForexLive.com, Subsequent votes will take place on 18, 19 and 20 June where candidates will have to secure 33 votes or more in order to not be automatically ruled out of contention. But once again, the ones with the lowest amount of votes will be eliminated from the race. The entire process will continue until there are two contenders left with the winner to only be announced towards the end of July. The initial reaction to the headlines was a quick 20pt move lower in GBPUSD, but this move has since reversed. The market is holding chart support in the 1.2670s, which may now give traders the confidence to bid prices back into the 1.2700s, but we think the markets range-bound tone since last week may persist a little while longer here. Sterling fell apart yesterday after a Labour Party motion to block a no-deal Brexit was defeated 309-298.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

Australia reported a beat on headline job growth for the month of May overnight (+42.3k vs +17.5k expected), but the devil was in the details and they werent that great. The majority of the gains come from new part time jobs, the average hours worked declined again, and the unemployment rate ticked up to 5.2% vs 5.1% expected as more people starting looking for work (participation rate increased from 65.8% to 66.0%). Traders took this as another sign that the RBA needs to cut rates, and so they quickly bid up Australian bonds and sold the Aussie. Odds of a 25bp July rate cut have shot up to 75%, the Australian 3yr bond yield has fallen below 1% for the first time ever, and AUDUSD has continued lower into the next trend-line support area (just above 0.6900). The market feels like it wants to bounce here despite all this, and we think todays 1.1blnAUD option expiry at 0.6935 (just above current prices) might be the reason for the more recent bid.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

JULY COPPER DAILY

JULY COPPER DAILY


USDJPY

Weve seen some peculiar price action in dollar/yen overnight; a swift move lower during Asian trade amid no headlines we could find and then a recovery during early European trade despite higher bond and gold prices and despite the Gulf of Oman news (which at first glance came across as risk-off type headlines). The S&Ps move back above familiar chart support in at the 2886 level seems to be leading the charge. Again, were not quite so sure what stock investors are happy about this morning, but were going to guess energy stocks will be trading higher. Chart resistance today remains in the 108.50s, like yesterday. Over 1.6blnUSD in options roll off between the 108.65 and 108.80 strikes this morning.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

JUN S&P 500 DAILY

JUN S&P 500 DAILY

Charts: TWS Workspace

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Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

Interested in creating a custom foreign exchange trading plan?  

Email: erik.bregar@ebcfx.com

Phone: 888-729-9716

 

Contributing author since 09/25/17 

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