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Markets cheer China’s exports but oil bears still under control

Oil price action suggests that bears are in control and very aggressive

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
bg_bull bear

Another wave of jobs cutting hit energy companies as oil downtrend resumed in 2016. The latest victims were British Petroleum employees as the company announced yesterday plans to cut 4,000 jobs in its crude oil production division of which 600 people working at North Sea projects. The aftermath of lower oil prices had been cutting 250,000 jobs in the past one and half year and more than $200 billion in projects either cancelled or postponed.

On Tuesday, U.S. oil traded below $30 for the first time since 2003 testing a low of $29.93, extending losses over the first seven trading sessions to 19.04%. Oil price action suggests that bears are in control and very aggressive, making bulls cautious in getting in, as very few willing to catch a falling knife.

Calling a bottom is a very dangerous game but seems we got closer to Goldman’s $20 target and now more bearish voices coming out with Standard Chartered saying that fund selling may not relent until price reaches $10.

Chinas trade data offered some positive vibes to Asian equities and could spread into Europe and U.S.  Chinese exports in December fell by only 1.4% and imports by 7.6% in dollar term vs expectations of falling by 8% and 11.5% respectively. In Yuan’s term, exports in fact rose by 2.3%, suggesting that renminbi depreciation over the past 6 months started supporting the real economy despite the recent turmoil in equities and fluctuations in currencies.   

Risk assets cheered up on the news sending equities and high yielding currencies higher.  AUD and NZD were the best performing currencies both appreciating by 0.5% against the USD and still have the potential to further erase last week’s losses if risk appetite resumed towards the European and U.S. trading session.  However, the CAD is only rising slightly after dropping to lowest levels since May 2003 as the commodity currency is taking its cue from oil prices. As long oil prices remain depressed, the Lonnie might find it difficult to enjoy a risk rally, so keep an eye on oil inventories today. The Euro and Yen are likely to be under pressure for today as both currencies are being used to fund investments in risk assets. Considering no tier one economic data due to release today the EURUSD will continue consolidating with 1.07 – 1.09

The cable is holding steady after data yesterday showed UK industrial production suffered its sharpest fall since 2013 sending GBPUSD to 5 years low. The drop in currency should be good news for Bank of England as they continue to face low inflationary pressure; however, tomorrow’s central bank meeting will either provide some support or open the way to test 1.4230 support level (2010 low)

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.