Forex News and Events
Sell oil rebound
Crude oil continued to come under selling pressure as skepticism over an OPEC-led agreement with major producers increased. Reuters reported that Saudi Arabia will not participate in a summit among OPEC and non-OPEC producers on Monday. Saudi Arabia indicated that attending any meeting with non-OPEC producers would be pointless if the main 14 oil cartel members had not reached an agreement on cutting oil production among themselves. Failure to build a meaningful output cut will further weigh on US stocks. WTI front month slipped to $45.14, capping at nearly 5% from last week.
We remain sellers of crude oil and energy related stocks (especially in exploration & production) and any production agreement rally. We are extremely skeptical of major oil producers willing to cut or limit production in any capacity. In the short-term, USD/NOK as base at 8.50 should provide near-term support for a rebound to 8.63 near-term highs. On the peripherals, an expected ruling by the WTO against Boeing is likely to elicit a strong response from President-elect Trump. Further evidence of protectionist policy in the Trump administration is likely to be negative for crude oil prices.
SNB: Sight deposits increase again
The never-ending questions surrounding SNB intervention still remain unanswered today after the release of Swiss sights deposits. Earlier last week, total sight deposits surged to CHF 524.7 billion from CHF 520 billion and today’s data showed an increase to CHF 527.6 billion. Uncertainty regarding the ECB's monetary policy beyond March 2017 is clearly one strong factor pushing the SNB to intervene further.
Downside pressures on the EUR/CHF are still very significant. The CHF has not reached 1.08 since early November, when Trump’s election pushed the SNB to step up its intervention. We are now at a point where the SNB may act at any time, even outside of usual monetary policy meetings in order to weaken the franc.
Sight deposits are the SNB’s best tool to defend the Swiss franc and the Helvetic currency is now feeling the heat. We still believe that 1.08 represents a target for the central bank.
However, it is clear that the SNB cannot use this strategy indefinitely as the cost of its balance sheet would become ultra-heavy and would have a deeper impact on the real economy. In the short-term, with the Italian referendum on December 4th and with the latest polls predicting a Renzi defeat, there is the potential for even greater pressure on the franc.
The Risk Today
EUR/USD's buying pressures are clearly on despite ongoing retracement. Hourly resistance is given at 1.0680 (intraday high). A break of resistance at 1.0746 (17/11/2016 high) is needed to confirm a reversal. Expected to show renewed bearish pressures. In the longer term, the death cross indicates a further bearish bias despite the pair has increased since last December. Key resistance holds at 1.1714 (24/08/2015 high). Strong support given at 1.0458 (16/03/2015 low) is on target.
GBP/USD is not having enough momentum to reach resistance at 1.2674 (11/11/2016 high). Hourly support is given at 1.2302 (18/11/2016 low). Buying pressures seem to fade. Expected to see renewed bearish pressures. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.
USD/JPY is still consolidating. Resistance can be found at 113.90 (25/11/2016 high). The pair is heading toward 114.87 (16/02/2016 high). Support is given around 109.80 (16/11/2016 low). Stronger support lies at 108.56 (17/11/2016 low). Expected to see further upside moves. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
USD/CHF rally has faded. The technical structure remains nonetheless bullish. We monitor key support given at the parity. Hourly resistance lies at 1.0192 (24/11/2016 high). Expected to see further weakness. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.
