U.S. Session Forex Recap – Jan. 14, 2016

  • U.S. crude oil inventories increased by 0.2 million barrels
  • EIA projected U.S. shale oil output to fall but not enough to lift prices
  • WTI crude oil trading around $30.35/barrel, Brent crude oil below $30/barrel
  • Fed Beige Book: Price pressures still subdued
  • Fed official Evans stressed the need for a gradual tightening cycle
  • Japanese core machinery orders slumped by 14.4% vs. -7.3% forecast
  • Japan’s PPI down by 3.4% vs. -0.4% forecast

The lack of other top-tier economic data during the U.S. trading session kept forex junkies zoned in on oil price movements.

Major Events:

U.S. oil production reports – The latest U.S. crude oil inventories report revealed that stockpiles increased by 0.2 million barrels, lower than the projected 1.9 million gain and enough to keep WTI crude oil prices afloat for the time being. According to the EIA (Yep, the same folks that released their world oil forecasts yesterday!) U.S. shale oil output is expected to fall to 8.2 million barrels per day in 2016, but this might not be enough to rebalance global energy prices. Womp womp.

On a more positive note, the EIA reiterated that they expect oil prices to rebound later on in the year. However, industry analysts also pointed out that U.S. banks heavily exposed to U.S. shale oil investments could be exposed to the risk of collapse. Yikes!

Fed Beige Book release – Nope, not much clues on future Fed rate hikes here. The Fed Beige Book simply rehashed what most FOMC officials have been pointing out recently, which is that their focus is now turning to inflation trends. So far, price pressures have been subdued and it doesn’t help that wage growth is weak.

This cautious outlook was highlighted in Fed official Evans’ speech, as he shared that he’s less optimistic about inflation compared to most of its colleagues in the FOMC gang. He mentioned that the risks of hiking too quickly outweigh the risks of proceeding gradually.

Major Currency Movers:

CAD – With crude oil prices still at the front and center of financial market headlines, it’s no surprise that the Loonie chalked up yet another set of declines against its forex peers.

USD/CAD surged to new highs (I feel like I’m saying this every single day…) past the 1.4300 handle to a high of 1.4375, CAD/JPY resumed its dive and fell below the near-term support around 82.25, EUR/CAD broke past the 1.5600 mark onto 1.5665, and GBP/CAD is at the top of its short-term range at 2.0700.

GBP – Forex traders still showed no love for the British pound, as market participants probably started pricing in expectations for a downbeat BOE statement.

GBP/USD barely looked back before continuing its attempts to break below the 1.4400 handle, GBP/JPY is testing support at the 169.00 mark, and EUR/GBP carried on with its upside breakout to a high of .7545.

Watch Out For:

  • 12:30 am GMT: Australian employment change (-11K expected, +74.9K previous. Check out Forex Gump’s trading guide for this one!)
  • 6:00 am GMT: Japanese preliminary machine tool orders (-17.7% previous)

See more:

Asian Session Recap

London Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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