- Sellers layered from 0.8555 through to 0.8625
- There are some buyers on the way down, but the larger amounts not until 0.8475, 0.8450
- Sellers 0.7890/00, 0.7920 then 0.7950
- Buyers 0.7850/55 then 0.7800/10
New Zealand October trade balance data:
Trade balance -908m (largest October deficit since 2008)
NZ trade recorded a deficit of NZ$107m in the 12 months to October 31
From Statistics New Zealand:
Coming up at 0030GMT.
Here is a little background on the important role capital expenditure plays in the Australian economy (background via NAB & other sources):
Coming up soon from New Zealand, the October trade balance data at 2145GMT:
Plane imports helped the trade balance hit a big deficit for September, and these are expected to continue but not in these October figures.
The trade data is usually only of limited interest to the FX market, with minimal impact (normally).
We’ve noted the recent inability of the US dollar to rally on good news but today it was a different story. US economic data was soft but the US dollar didn’t slide, or at least not particularly far.
Durable goods orders numbers were poor and they were joined by a handful of weak indicators from elsewhere but US dollar weakness was mild, falling by at most 25-30 pips.
USD/JPY finish US trading about where it started after some losses in Europe and Asia. The pair slide down to 117.44 on the dip but slowly dug itself out of the hole and climbed to 117.73.
EUR/USD started US trading nearly flat after erasing a dip in European trading. The upward momentum continued after the data as 1.2500 fell on the way to a spike to 1.2532. That was a bit too much for this market and the pair slipped back to 1.2508.
Cable remained impressively bid throughout trading, even making a fresh high late in the day at 1.5806. The lows were higher throughout the day and we’re finishing near the highs — all good signs.
The commodity currencies have also been bid late in the day despite a warning about Chinese growth from Deere & Co. USD/CAD slid to 1.1234 from 1.1260 despite pressure on oil. The Aussie also erased a large dip below 0.8500 and finishes higher on the day at 0.8552.
For WTI oil, the $73.25 low from earlier in November was challenged but it held ahead of tomorrow’s OPEC decision.
EUR/JPY has wavered between negative and positive territory today but the latest push is to the upside. Yesterday’s high of 147.39 was briefly breached.
Strategists at Barclays recommend selling EUR/JPY near current levels, targeting a move to 142.10 and a stop at 148.50. They expect declines ahead of the ECB meeting on Dec 4 and the Japanese elections 10 days later.
Offers at 147.50 in medium size with more at 147.78, which is the 61.8% retacement of the Nov 20-24 decline and a key level on my charts. More sellers at 148.00 and 148.33.
Bids at 146.50, which was the intraday low today. More at 146.30 and just below.
The main event on the economic calendar on Thursday is the OPEC decision in Vienna. Several countries are hoping for a production cut but signs are strongly pointing to no change in quotas. The best oil bulls can hope for at this point is a pledge to adhere more closely to current quotas.
When will an official announcement come?
There is no set time or embargoed release of the decision, it usually leaks out of the meeting room shortly before the official announcement from Secretary General Abdallah Salem el-Badri.
At the most-recent meeting on June 11, headlines about no change in quotas first crossed at 6:58 am ET. The press conference began about an hour later.
At the previous meeting, on Dec 4, 2013, the first headlines crossed at 7:40 am ET. The May 31, 2013 meeting decision first leaked out about a minute earlier at 7:39 am GMT.
In general, the press conference is scheduled for 2 pm Vienna time, which is 1300 GMT but it can be changed on the fly. The decision usually leaks 20 minutes or more earlier.
This meeting is especially likely to run long because some nations are desperate for a cut. Reuters reported earlier today:
An OPEC delegate from one of the smaller oil producers suggested on Wednesday that the group’s meeting could be prolonged:
“They must agree, even if they have to stay here for two days. It is a matter of death or survival for budgets,” the delegate said.
“It might take a bit longer than the ordinary meetings.”
What’s different this time is that the press conference is scheduled for 1600 local time, which is two hours later than normal. The headlines usually leak out about 20 minutes before the press conference so 1440 GMT would be a good spot for the over/under.
Bottom line: Begin looking for headlines at 1230 GMT (7:30 am ET) but don’t expect anything for at least another hour. If we get past 1445 GMT, the market will begin to become concerned there is no consensus and that points to a higher likelihood of a surprise cut so oil could begin to climb.
At this point, the probability of an OPEC production cut must be down to about 5% but buyers continue to step in ahead of the November low of $73.25.
I struggle to see how that level will hold when the announcement is made tomorrow (in thinner liquidity because the US is out).
The risk, for me, is that all the selling is over on the rumor of the announcement. Perhaps we get a brief spike through stops and $73.00 but then the ‘buy the fact’ crowd will step in.
In the bigger picture, I think the trade is oil shorts for the longer term. There’s a game of chicken going on in terms of production and OPEC thinks it can bankrupt US shale producers. A price war might be the story of 2015 and then we’re talking about $50-60 oil.
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