CRUDE OIL FALLS SHARPLY AFTER A SURPRISE INCREASE IN INVENTORIES
Japanese yen declined against the USD after Japan reported disappointing export data. In September, exports fell by minus 1.2% while exports to the US declined by 0.2%. The decline is mostly attributed to the current issues about trade. It has been offset by the weakening yen, which makes exports cheaper. Since April, the yen has declined by more than 7% against the USD.
The dollar index rose broadly after the Federal Reserve released minutes for the past meeting. The minutes showed that all officials were supportive of interest rate hikes. They also suggested that a time will come when the Fed will move from normalization to a more restrictive stance. The statement said:
With regard to the outlook for monetary policy beyond this meeting, participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term.
Certainly, the statement did not please the US President, Donald Trump, who has criticized the Fed for the ongoing tightening. In interviews, he has called the Fed crazy and cited it as his biggest threat. He is also disappointed with Jerome Powell being the Fed chair.
The euro declined against the USD in the Asian session after reports that a deal between the US and the EU was at risk. In July, the US President met with EU leaders to iron out issues about trade. They left the meeting with a truce and a promise for a deal that involved lowering of tariffs and non-tariff barriers. Yesterday, commerce secretary, Wilbur Ross, said that the President’s patience was ‘not unlimited’. He accused Cecilia Maelstrom of acting in bad faith while negotiating with the US. There was criticism about the deal with many people saying it was short of specifics.
The price of crude oil declined sharply after EIA released the latest inventory numbers. The numbers showed that inventories jumped to 6.5 million barrels, which was almost triple than what traders were expecting. This was similar to last week when inventories continued to rise. This week, the price of crude has been fluctuating as traders think about inventories, Iran sanctions, and the growing issues between the US and Saudi Arabia.
The EUR/USD pair declined to an intraday low of 1.1500 in the Asian session. This was the lowest level since Thursday last week. The double EMA of the 14 and 28-day moving averages point to a continued decline of the pair. However, this is happening during a period of low volumes, which is an indication that the pair’s decline could be short-lived. This is confirmed by the momentum indicator and the accumulation/distribution indicators as shown below.
The USD/JPY pair has been moving upwards since Monday this week. It has moved from a low of 111.61 to the current high of 112.72. The price is along the 14 and 28-day EMA which seem headed for a crossover. The upward momentum has eased as shown by the momentum indicator above while the strength of the upward trend is also questionable. This is because of the trend in the ADX indicator, which is currently at 26.
The price of crude oil continued to decline after inventory numbers released yesterday. The WTI reached a low of $69.29, which was the lowest level since September 20. The price is deeply along the lower line of the Bollinger Band, which is a sign that the downward trend will continue. This is confirmed by the MFI indicator and the RSI which show a likelihood of further declines. If it happens, the XTI/USD pair will likely test the 68 support.