Monday, September 29, 2014

Oil Drops as China and Fed Weigh on Markets

West Texas Intermediate crude headed for its biggest loss in a week as U.S. economic data bolstered the outlook for higher interest rates. Brent declined in London amid concern Chinese demand is slowing.

Futures dropped as much as 0.9 percent in New York and 0.8 percent in London. Both grades were heading for their biggest quarterly loss in more than two years. The dollar traded near its highest closing level against the euro in more than two years, curbing the appeal of commodities, amid speculation the Federal Reserve will increase interest rates. Gauges of Chinese manufacturing are due tomorrow and on Oct. 1, and U.S. payrolls data will be released on Oct. 3.

“It will be a very heavy week in macro data,” Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. “China is not a strong story. For financial investors, the Fed moving out of quantitative easing does not call for investment in commodities,” he said by e-mail.

WTI for November delivery slid as much as 80 cents to $92.74 a barrel in electronic trading on the New York Mercantile Exchange and was at $93.22 at 12:59 p.m. London time. The contract climbed $1.01 to $93.54 on Sept. 26, the highest close since Sept. 17. The volume of all futures traded was about 15 percent below the 100-day average for the time of day. Prices have lost 12 percent in the past three months, the biggest quarterly drop since June 2012.

Brent for November settlement decreased as much as 73 cents to $96.27 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $3.52 to WTI on ICE, near the narrowest in more than a year. Brent has lost 14 percent this quarter.

via Bloomberg

USD/CAD – Canadian Dollar Remains Above 1.11, US Pending Home Sales Slips

After strong gains last week, USD/CAD has taken a breather on Monday, as the pair trades in the mid-1.11 range in the European session. On the release front, US Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. There are no Canadian releases on Monday.

The Canadian dollar has been no match for the US dollar, losing about 200 points last week. Will the loonie’s downward trend continue? On Tuesday, Canada releases GDP, a critical event which traders should treat as a market-mover. Canadian GDP is released monthly, unlike most other developed countries which post GDP on a quarterly basis. The indicator dipped to 0.3% in July, compared to 0.4% a month earlier. Another slight drop is expected, as the August estimate stands at 0.2%. If the indicator falls short of the forecast, we could see the loonie lose more ground.

Last week, US, Core Durable Goods Orders posted a strong gain of +0.7%, bouncing back from the previous reading of -0.8%. Durable Goods Orders continues to take its riders on a roller coaster ride, plunging 18.2% in August, compared to a huge gain of 22.6% a month earlier. Unemployment Claims rose to 293 thousand, within expectations.

USD/CAD for Monday, September 29, 2014

USD/CAD September 29 at 13:45 GMT

USD/CAD 1.1165 H: 1.1178 L: 1.1138

USD/CAD Technical

S3

S2

S1

R1

R2

R3

1.0961

1.1004

1.1124

1.1278

1.1414

1.1493

USD/CAD has shown almost no change in the Asian and European sessions, as the pair trades in the mid-1.10 range.

1.1124 is providing weak support. 1.1004 is stronger.

1.1278 is a strong resistance line. It has remained intact since March.

Current range: 1.1124 to 1.1278

Further levels in both directions:

Below: 1.1124, 1.1004, 1.0961, 1.0852 and 1.0775

Above: 1.1278, 1.1414, 1.1493 and 1.1669

OANDA’s Open Positions Ratio

USD/CAD ratio has a majority of short positions, indicating trader bias towards the Canadian dollar moving to higher ground.

USD/CAD Fundamentals

12:30 US Core PCE Price Index. Estimate 0.0%. Actual 0.1%.

12:30 US Personal Spending. Estimate 0.5%. Actual 0.5%.

12:30 US Personal Income. Estimate 0.3%. Actual 0.3%.

14:00 US Pending Home Sales. Estimate -0.4%. Actual -1.0%.

* Key releases are in highlighted bold.

*All release times are GMT

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.

German Consumer Confidence Keeps Falling As Per Survey

German consumer confidence is expected to deteriorate for a second consecutive month in October, a sentiment survey released Friday showed, an indication that crises in Russia, Ukraine and elsewhere are taking their toll on the mood of businesses and households in Europe’s biggest economy.

The monthly survey of GfK market research group shows consumer confidence falling to 8.3 points for October from an unrevised 8.6 points in September. Nonetheless, confidence remains “at a good level,” GfK said.

Despite some recent economic weakness, Germany unemployment is near record lows, incomes are rising and borrowing costs are historically low.

GfK uses survey data from the current month to derive a figure for the month to come. Economists polled by The Wall Street Journal predicted an October reading of 8.5 points.

“It is above all the various international crises which are behind a slowdown in the consumer climate at present and the first signs of uncertainty are beginning to show among German consumers,” GfK said, adding that if the crises escalate further, a deterioration in general conditions in Germany—which have so far held up—cannot be ruled out.

“In this case, there is a danger that private consumption would no longer fulfill its role as a key pillar of the German economy,” GfK added.

via WSJ

Gold Rises After Stock Sell Off Spurs Metal Demand

Gold rose in New York as stocks fell around the world, boosting demand for an alternative investment.

The MSCI All Country World Index dropped 0.2 percent as Hong Kong’s Hang Sang Index erased gains for the year. Gold climbed 1.8 percent this year, lagging gains in the Bloomberg Dollar Spot Index and the MSCI global stocks index.

“What happens with equity markets and geopolitical tensions may drive day-to-day sentiment,” said Sun Yonggang, a macroeconomic strategist at Everbright Futures Co. in Shanghai. “The dollar remains the driver of gold direction.”

Gold for December delivery rose 0.7 percent to $1,223.70 an ounce by 7:57 a.m. on the Comex in New York. The metal has declined 5 percent this month and 7.4 percent in the third quarter, the first loss this year.

A report today may show U.S. personal spending expanded in August after data last week showed the world’s largest economy grew the most since 2011 in the second quarter. Consumer spending accounts for about 70 percent of gross domestic product.

Holdings in the SPDR Gold Trust, the biggest gold-backed exchange-traded product, contracted 0.1 percent on Sept. 26 to 772.25 metric tons, the least since December 2008.

via Bloomberg

Refinery Closures Could Lead to Higher Gas Prices in the US

Speculators increased wagers on higher U.S. gasoline prices by the most since February as refinery closures constricted supply.

The net-long position jumped 45 percent from a four-year low as hedge funds pared record short bets and added long wagers for the first time in six weeks, weekly U.S. Commodity Futures Trading Commission data through Sept. 23 show.

Refineries in eastern Canada and Texas shut gasoline units for unplanned repairs as others began seasonal maintenance. Futures contracts for October traded at the highest premium to November since 2012, reflecting heightened concern about supply. The closures threaten the retreat at the pump that has drivers paying the lowest late-September prices since 2010.

“People have covered their positions or moved away from short to long,” Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London, said by phone Sept. 26. “There’s a huge amount of FCC outages in North America at the moment,” she said, referring to fluid catalytic crackers that make gasoline.

Gasoline for October delivery gained 6.99 cents, or 2.7 percent, to $2.6287 a gallon on the New York Mercantile Exchange in the period covered by the CFTC report. The contract gained 1.1 percent to $2.6901 in today’s electronic trading.

Retail prices rose in the three days ended Sept. 24, stemming a 16-day decline. The national average was $3.337 on yesterday, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.

via Bloomberg

NZD Falls After Central Bank Discloses Sale

The New Zealand dollar sank Monday after the central bank disclosed it conducted its biggest sell-off of the currency in seven years to lower an exchange rate that is squeezing exporters.

Data released by the Reserve Bank showed it sold 521 million New Zealand dollars ($410 million) during August. That came after the central bank governor, Graeme Wheeler, said the currency was too strong.

The disclosure pushed the currency known as the Kiwi down nearly 2 percent against the U.S. dollar to its lowest level in over a year before it recovered slightly to trade at $0.78. The currency has dropped 12 percent since July, when the central bank announced it was suspending its program of interest rate hikes.

Many would like to see it fall further, including Prime Minister John Key, a former currency trader.

On Monday, Key told reporters a New Zealand dollar worth $0.65 would represent a “Goldilocks rate: Not too high, not too low, just about right.”

However, he added, “Just because I might think that’s about the rate that works for exporters doesn’t mean that’s the rate it’s going to get to.”

The central bank had earlier been the first among developed nations this year to begin hiking interest rates. It raised the benchmark rate four times to 3.5 percent as it tried to cool the economy, which had been growing at a relatively fast clip of 4 percent.

via Mainichi