Pre holiday scramble

Oil Markets

WTI rebounded towards $ 56.00 before markets chilled back toward.54.40 after traders were left mulling US inventory data which continued to show significant supply builds and comes on the back of sustained record US crude oil production. And for record-keeping purposes and confirming what we already knew, Saudi Arabian oil production surged to a record 10.8-10.8mn bpd in early November thanks to stronger-than-usual demand ahead of Iran sanctions.

Another reminder why the outlook for oil prices remains skewed lower into years end. So, what can we expect when the market pivots to US pipeline bottlenecks getting alleviated in 2019? The entire notion of a tight global spare capacity argument goes down the well.

Regardless of what side of the fence you are on what’s unmistakable to oil patch veterans is just how mind-bogglingly bearish the Oil community has become on such short order.

And as Brent spreads move from backwardation to contango its unlikely buy only funds or even passive investors for that matter will be attracted to the markets anytime soon. Not to mention the fact President Trump appears to have Saudi Arabia over the proverbial ” oil barrel” dealing the Khashoggi fiasco

Currency markets

USD pulled back after Wednesday pre-holiday scrum while NY G-10 trader had Thanksgiving dinner on their mind as major G-10 currency pairs were confined to a small ten pip trading range post-London close. Since we are entering what is affectionally referred to as “turkey day” barring any unsightly headlines, near-term trading ranges will likely be honoured during the Asia session.

US durable goods disappointed which triggered a knee-jerk move lower on USDJPY and US yields. But  the data was not  a big enough  print to rattle the Feds,  but none the less it’s a subtle reminder that USD will remain extremely sensitive to lower than expected US economic data prints despite the Fed on track to raise interest rates in December

Equity markets

While the equity market carnage somewhat abated but ultimately the recovery flatlined before the S&P headed south into the close. All but suggesting this half-hearted recovery effort should not be confused with anything other than pre-holiday scramble doing little more than what amounted to chasing oil prices up and down. But with the overwhelming consensus suggesting we’re not even close to being out of the weeds yet, it’s down to the US retail sector to provide a lifeboat to investors as the markets pivots to  Black Friday shopping performance which will be the ultimate litmus test of US consumer confidence heading into the holiday season. Let’s see if the US consumer opens their purse string and put all this tax savings into play. But as I’ve been reminded countless time before, never underestimate the power of the US consumer.

Malaysia

Expecting a relatively quiet session as foreign investors will be sidelined until next week due to the US Thanksgiving holiday effect. The overall backdrop has not changed, and the markets remain incredibly bearish as macro sentiment is weak.

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.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes