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• Crude oil prices remain on the defensive around the $66.00 mark.
• WTI trades just above 2-month lows at $65.30 seen on Tuesday.
• US crude oil supplies increased by around 3.2M barrels last week.

Prices of the barrel of the American reference for the sweet light crude oil are extending the downtrend and gyrating around the $66.00 mark.

WTI offered around $66.00/bbl

Prices of the barrel of the West Texas Intermediate are down for the third session in a row following the publication of the DoE’s report, although they have managed to bounce off recent 2-month lows in the $65.30 area (Tuesday).

The EIA’s report failed to lift the mood around WTI after US crude oil inventories rose by 3.217M barrels during last week.

In addition, Weekly Distillate Stocks dropped by 4.054M barrels and Gasoline inventories went down more than forecasted by 3.161M barrels.

Further out, supplies at Cushing rose by 1.878M barrels, adding to last week’s 1.371M barrels increase.

Prices of crude oil remain under pressure so far today, shedding more than 15% in October only, falling from multi-year tops beyond the $77.00 mark per barrel seen earlier in the month to yesterday’s low in the $65.30 region.

Concerns over the US-China trade dispute, prospects of lower demand for crude oil in the next months and renewed jitters regarding potential oversupply in the markets have been weighing on traders’ sentiment as of late. Also keeping the pressure on prices, a survey by Reuters said that the OPEC increased its production this month to the highest level since 2016.

News from the speculative community showed that oil net long positions dropped to the lowest level since late October 2017 during the week ended on October 23, as per the latest CFTC report.

Moving forward, driller Baker Hughes will release its weekly report on US oil rig count on Friday.

WTI significant levels

At the moment the barrel of WTI is down 0.32% at $66.06 and a breakdown of $65.32 (low Oct.30) would expose $64.69 (low Aug.16) and then $63.59 (low Jun.18). On the upside, the next resistance lines up at $67.34 (10-day SMA) followed by $67.70 (200-day SMA) and finally $70.00 (high Oct.18).

Below are the key takeaways from the weekly report published by the U.S. Energy Information Administration.

• U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending October 26, 2018.
• Gasoline production increased last week, averaging 10.4 million barrels per day.
• Distillate fuel production increased last week, averaging 5.0 million barrels per day.
• U.S. commercial crude oil inventories increased by 3.2 million barrels from the previous week.
• Total products supplied over the last four-week period averaged 20.6 million barrels per day, up by 5.4% from the same period last year. 

El EUR/USD quebró los mínimos previos y aceleró el descenso, acercándose rápidamente a 1.1300 y a los mínimos del 2018. La cotización cayó desde 1.1340 hasta 1.1310, alcanzando el nivel más bajo en 11 semanas. 

El par se mantenía en la zona de los mínimos con el momento bajista muy fuerte. El movimiento se dio ante un fortalecimiento del dólar luego de la apertura de Wall Street y ante un fuerte descenso del par EUR/GBP. 

El índice del dólar marcó nuevos máximos desde junio de 2017 sobre 97.15. Al mismo momento las acciones en Wall Street extendían la suba de ayer y los rendimientos de los bonos del Tesoro trepaban. El oro caída con fuerza en este escenario de fortaleza del dólar y se acercaba a $1210 la onza. 

Los datos económicos de hoy mostraron que en EE.UU., según ADP el sector privado creó 227.000 puestos de trabajo en octubre superando las expectativas. Mientras que en Europa, el dato de inflación de Francia y el de ventas minoristas de Alemania estuvieron por debajo de lo esperado.

Niveles a tener en cuenta

A la baja, el primer soporte que asoma para el EUR/USD es la zona clave de 1.1300. En 1.1299 están los mínimos del presente año y un  quiebre de ese nivel podría favorecer una aceleración bajista. Los soportes luego se ven en 1.1280 y 1.1250. En la dirección contraria, la primera resistencia se ubica en 1.1330, seguido por 1.1340 (media móvil de 20 horas) y 1.1360 (máximo del día). 

Andreas Steno Larsen, Research Analyst at Nordea Markets, suggest that the upward pressure on EUR/DKK is likely to remain into 2019, which leaves an elevated risk of i) FX intervention by the Danish central bank, ii) an independent Danish rate hike (Independent Danish rate hike draws closer) if intervention proves insufficient.

Key Quotes

“As the upward pressure on EUR/DKK will intensify in the coming months, the market should start to price in the probability of an interest rate hike by the Danish central bank.”

“Two reasons why the upward pressure on EUR/DKK will remain intact into 2019

Firstly, the geographical asset allocation of the Danish pensions sector has a significant impact on the EUR/DKK rate.

Secondly, we see a large resemblance to the situation that was ongoing into 2013 when the first round of LTRO loans was paid back to the ECB by European banks.”

In light of the oongoing up move, the pair could visit 113.70, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to the “test the 112.60/65 resistance” yesterday and the clear break of this level and the subsequent strong advance that hit a 3-week high of 113.09 came as a surprise. The rapid rally is severely overbought and while further advance is not ruled out, the prospect for a sustained break of 113.50 is not high (next resistance is at 113.70). On the downside, we expect 112.60 to be strong enough to hold any intraday pullback (minor support is at 112.85)”.

Next 1-3 weeks: “While we indicated yesterday “the odds for further USD weakness have diminished”, the subsequent strong rally in USD that hit a 3-week high of 113.09 was clearly not expected (note that USD extended its gain after NY close). Short-term momentum is clearly strong but at this stage, it is unclear to us whether USD can maintain the current strength in the days ahead. From here, we see scope for USD to test the 113.70 resistance but the probability of a sustained move above this level is not high for now. All in, USD is expected to stay underpinned as long as the ‘key support’ at 112.60 is intact”.

   •  Upbeat Canadian GDP growth figures prompt some aggressive selling.
   •  Stronger ADP report/retracing oil prices helped limit deeper losses.

The USD/CAD pair quickly reversed Canadian GDP-led dip to the 1.3100 neighborhood and might now be headed back towards the top end of its daily trading range. 

The pair met with some aggressive supply and fell around 30-35 pips from an intraday high level of 1.3140 in a knee-jerk reaction to slightly better-than-expected Canadian monthly GDP print, coming in to show m/m growth of 0.1% in August as against a flat reading anticipated.

The downfall, however, was cushioned amid a modest US Dollar rebound, supported by stronger than expected ADP report. The latest US employment report showed that private sector employers added 227K new jobs in October as compared to consensus estimates pointing to a reading of 189K, down from 230K previous.

This coupled with an intraday retracement in crude oil prices further undermined demand for the commodity-linked currency – Loonie and further collaborated towards limiting any deeper slide. The pair once again found some support near the 1.3100 handle and is now trading back with a positive bias, around the 1.3125-30 region.

With today’s US/Canadian macro data out of the way, the USD/oil price dynamics might continue to act as key determinants of the pair’s momentum through the US trading session. 

Technical levels to watch

The 1.3145-50 region might continue to act as an immediate resistance, above which the pair is likely to accelerate the up-move further towards reclaiming the 1.3200 handle. On the flip side, the 1.3100 handle now seems to have emerged as an immediate strong support, which if broken might prompt some aggressive selling and drag the pair towards mid-1.3000s en-route the key 1.30 psychological mark.
 

“Real gross domestic product rose for a seventh consecutive month, edging up 0.1% in August,” Statistics Canada reported on Wednesday. “Growth was concentrated in oil and gas extraction and finance and insurance, which more than offset declines in 12 of 20 industrial sectors.”

Key takeaways from the press release

• The output of services-producing industries edged up 0.1%, while output was essentially unchanged for goods-producing industries.
• The mining, quarrying and oil and gas extraction sector posted the largest increase in activity in August, rising 0.9% to nearly offset the declines in the two previous months.
• Following a 0.4% decline in July, the finance and insurance sector rose 1.0% in August, the largest monthly gain since May 2017.
• Retail trade declined 0.2% in August, the fourth decrease in five months, as 7 of 12 subsectors contracted.