Crude Oil Value Forecast Overview:
Crude oil costs stay trapped within the sideways consolidation that has outlined value motion since October 31. In the meantime, USD/CAD continues to press larger, extending its successful streak to 5 consecutive days, and up 11 of the previous 13 periods general.The 5-day correlation between USD/CAD and crude oil costs is Zero.02 and the 20-day correlation is –Zero.71.; one week in the past, the 5-day correlation was Zero.35 and the 20-day correlation was -Zero.32.Current modifications in retail dealer positioning provides us a stronger bearish bias for each the Canadian Greenback and crude oil costs.
In search of longer-term forecasts on crude oil costs or the Canadian Greenback? Take a look at the DailyFX Buying and selling Guides.
Crude Oil Hit by Stock Knowledge
Crude oil costs have confronted a minor setback on Thursday after information from the US Vitality Info Administration confirmed an surprising enhance in power provides. In flip, oil-sensitive currencies just like the Canadian Greenback are persevering with to commerce weaker on the session.
The most recent information from the US EIA exhibits that oil inventories have now elevated for the seventh time in eight weeks, leading to a build-up of greater than 40 million barrels to US power inventories since early-September. Based on a Bloomberg Information survey, merchants have been in search of inventories to have elevated by 1.6 million barrels by the week by November Eight; as an alternative, 2.2 million barrels have been added.
Crude oil costs proceed to stroll a tightrope, balancing considerations about provide and demand. On the demand aspect, merchants are extra optimistic decision to the US-China commerce warfare will scale back considerations over international progress. On the provision aspect, there are rising indicators that OPEC will decline one other spherical of manufacturing cuts when the cartel gathers subsequent month. Failure to achieve traction right here by crude oil may have ramifications for the Canadian Greenback.
Relationship Between Crude Oil and Canadian Greenback Continues to Strengthen
For a foreign money with an economic system’s whose power sector constitutes roughly 11% of GDP, the Canadian Greenback traditionally has been delicate to actions in crude oil costs. After a interval of transition due to headlines across the US-China commerce warfare and the Brexit deadline, we’re beginning to see the traditionally optimistic relationship between power markets and the Canadian Greenback return. The 20-day correlation between USD/CAD and crude oil costs is -Zero.71; one week in the past, the 20-day correlation was -Zero.32.
Crude Oil Value Technical Evaluation: Day by day Chart (November 2018 to November 2019) (Chart 1)
Crude oil costs stay trapped of their broad vary since June, persevering with to commerce between the 23.6% and 50% retracements of the 2018 excessive/low vary, from 50.49 to 59.61. Extra not too long ago, the two-week buying and selling vary that has encapsulated value motion since October 31, between 53.70 and 57.84, has confirmed to be the important thing vary to observe. As we speak’s day by day hammer candle is forming just under the two-week vary excessive, with in the present day’s excessive coming in at 57.73.
Crude oil costs are again to their day by day 5-EMA, however stays above day by day Eight-, 13-, and 21-EMAs. Yesterday it was famous that “bullish momentum is beginning to agency up – however solely marginally.” Such momentum has already pale. Whereas day by day MACD continues to rise in bullish territory, it’s tempo is slowing; Sluggish Stochastics are starting to leak out of overbought territory. It thus nonetheless holds that merchants might want watch for a break of the two-week buying and selling vary between 53.70 and 57.84 earlier than any additional selections are taken.
Crude Oil Value Technical Evaluation: Weekly Chart (December 2015 to November 2019) (Chart 2)
The longer-term crude oil value forecast has not modified. Crude oil costs proceed to commerce under the rising trendline from the 2016 and 2017 lows, having carved out a symmetrical triangle for the reason that October 2018 excessive. Momentum is simply beginning to flip larger, however stays uninspiring. Crude oil costs are as soon as once more above their weekly Eight-, 13-, and 21-EMA envelope. However weekly MACD stays in bearish territory, even whether it is nonetheless trending larger, and Sluggish Stochastics have returned to their median line. It nonetheless holds that extra readability is required.
IG Consumer Sentiment Index: Crude Oil Value Forecast (November 14, 2019) (Chart three)
Crude oil: Retail dealer information exhibits 42.81% of merchants are net-long with the ratio of merchants brief to lengthy at 1.34 to 1. The variety of merchants net-long is 16.63% decrease than yesterday and seven.36% decrease from final week, whereas the variety of merchants net-short is 64.89% larger than yesterday and 22.51% larger from final week.
We usually take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests crude oil costs might proceed to rise. Merchants are additional net-short than yesterday and final week, and the mix of present sentiment and up to date modifications provides us a stronger crude oil-bullish contrarian buying and selling bias.
USD/CAD Charge Technical Evaluation: Day by day Chart (November 2018 to November 2019) (Chart four)
USD/CAD’s successful streak is extending to 5 days, and 11 out of the previous 13 general. USD/CAD is pushing larger above the day by day Eight-, 13-, and 21-EMA envelope, which stays in bullish sequential order. Day by day MACD is trending larger by its sign line, whereas Sluggish Stochastics are holding in overbought territory. USD/CAD has lastly cleared the March 2019 swing low at 1.3247, the place it has discovered promoting stress within the first half of the week. Accordingly, it nonetheless holds that “the rising trendline from the July and September 2019 swing lows comes into play close to 1.3275 by the rest of the week.”
USD/CAD Charge Technical Evaluation: Weekly Chart (November 2018 to November 2019) (Chart 5)
Nothing has modified on the weekly timeframe. “USD/CAD’s rebound in November comes after the pair discovered two vital help areas on the finish of October. First, USD/CAD charges discovered help on the trendline from the 2012 and 2017 lows. Second, USD/CAD was in a position to flip larger from the 61.Eight% retracement of the 2016 excessive to 2018 low vary at 1.3065.
With beneficial properties over the previous two weeks, USD/CAD is popping above its weekly Eight-, 13-, and 21-EMA envelope. Weekly MACD is simply turning larger however stays under its sign line. In the meantime, Sluggish Stochastics is popping larger, though stays under its median line. The longer-term bearish potential for USD/CAD stays, however is just not the first focus at current time.”
IG Consumer Sentiment Index: USD/CAD Charge Forecast (November 14, 2019) (Chart 6)
USD/CAD: Retail dealer information exhibits 38.41% of merchants are net-long with the ratio of merchants brief to lengthy at 1.60 to 1. The variety of merchants net-long is 2.27% larger than yesterday and 27.25% decrease from final week, whereas the variety of merchants net-short is three.44% decrease than yesterday and 41.06% larger from final week.
We usually take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests USD/CAD costs might proceed to rise. Positioning is much less net-short than yesterday however extra net-short from final week. The mix of present sentiment and up to date modifications provides us an extra combined USD/CAD buying and selling bias.
Learn extra: USD/CAD Jumps with BOC Charge Odds; AUD/USD Hit as RBA Reduce Odds Rise – Central Financial institution Watch
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— Written by Christopher Vecchio, CFA, Senior Forex Strategist
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