12th September 2018 - The oil price raised the risk appetite and sent CAD higher

Walid Salah Eldin

Active member
203 1
The Oil rising could spur CAD gains across the broad sending USDCAD down to traded currently near 1.3070, as the Canadian economy depends mainly on exporting oil to US.

The gasoline prices reacted positively by a remarkable way to the threat of Hurricane Florence which can temper the oil producing from US east coast.
While Brent crude oil price is now hovering near the year high close to $80 per barrel as the US-made sanctions against the Iranian oil exports which will be activated in the beginning of November started to take the market attention.

The energy companies shares could be boosted by the oil prices rising sending Dow Jones up 0.44% gaining 113.99 points, after it has started yesterday session in the negative territory on worries about the Trade tension between US and China.

The risk appetite returning and the expectations of watching higher interest rate in US could lower the demand for the US Treasuries sending their yields up in the secondary money market.
UST 10yr yield reached 2.9792 at the end of the US session, after it had been standing close to 2.94% since the upbeating Aug US Labor report release which has sent this yield up from 2.88% last Friday on rising of the interest rate outlook in US.

The Asian equity indexes are looking ahead of positive opening, after their US counterparts closed up ignoring this time the worries about the trade tension which has been triggered this week by Trump’s signal that he’s ready to target a sum of goods equal to virtually all imports from China.
His signal came to raise the market attention toward the Trade War, after The deadline for public comment on proposed US tariff hikes on an additional $200 billion of Chinese imports ended last Thursday without new announced levies from Trump.

The investors' risk appetite has also shrugged off the negative impact of USD interest rate rising on the emerging economies and their currencies such as the Argentinean Peso and the Turkish lira.

The British pound is still having footing above 1.30 psychological level, after Chief EU Negotiator Michel Barnier said that a Brexit deal could be reached within the next 8 weeks following news about easier stance from the Germane side to pass a Brexit deal can cap financing turbulence and erode the business confidence.
His comments removed most of the pressure he placed on GBP last week by saying that he strongly opposes Britain's Brexit plan!

By God's will, The market will be waiting tomorrow for The MPC meeting outcome, after the committee raised the interest rate 0.25% last Aug. 2.
This meeting comes, after BOE's chief Mark Carney has already warned last week about reaching no Brexit deal can dampen the economic activity in UK.
Mark Carney said that The MPC doesn't have a forecast for no deal Brexit and he can't make a long term forecast on the potential impact of a no deal Brexit on the economy.
Carney said that the markets see another sterling drop, if there is no Brexit deal.
He said also that the real income squeeze would return for UK households for a few years if no Brexit deal and that could lead to a material rise in prices in the shops due to weaker pound and potential tariffs and then the policy would be tighter instead of looser in that case.

GBPUSD faced difficulty in rising higher than 1.3086 yesterday, after it could be able to resume its rebounding following forming higher low at 1.2784 on Sep. 5 above its bottom of last Aug. 15 at 1.2661.
GBPUSD resided now for trading close but above 1.30 psychological level trying to maintain a place above its daily SMA50, while the pair is still undermined over longer range by continued existence below its daily SMA100 and its daily SMA200.
GBPUSD is trading now in its third consecutive day of being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.2802.
GBPUSD daily RSI-14 is now referring to continued existence inside the neutral area reading 56.234.
GBPUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside the neutral area at 79.291 close to the overbought region above 80 leading to the upside its signal line which is lower reading 74.283 in the neutral region, after positive crossover inside of it on forming a higher low at 1.2784.

Important levels: Daily SMA50 @ 1.2994, Daily SMA100 @ 1.3191 and Daily SMA200 @ 1.3525
Experienced S&R:
S1: 1.2785
S2: 1.2661
S3: 1.2588
R1: 1.3086
R2: 1.3212
R3: 1.3362

Kind Regards
Global Market Strategist of FX-Recommends
Walid Salah El Din


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