3 Takeaways from Opec Meeting

Rumors turned into fact, as Opec (Organization of Petroleum Exporting Countries ) refrained from cutting back its oil output numbers yesterday, sending the price of a barrel of Brent Crude rude tumbling to $71 and WTI below$70, a move of more than 25% in the last 50 trading days. Here is how different markets reacted to the news.

1- Oil related currencies hit hard

Since oil and the US dollar are often times reversely inter-connected, the jump of Ms. USA upon the news wasn’t that big of a surprise. But the news also weighed on oil related currencies, pushing the Ruble, once again, to an all time low versus the Dollar. Nigeria’s central bank was also forced to intervene in the FX market with a big Dollar sale to try and keep the Naira in line. More mainstream commodity currencies were also hit hard, with the Canadian Dollar falling almost one cent against its US counterpart.

2- The impact on the stock market was mixed

The news from Opec also impacted global stock markets fairly significantly, but it wasn’t all bad. Energy companies were hit hard on the news as it will hurt/wipe out profits, but airlines and other big energy users were trading higher, as this should give them a significant cost reduction – albeit with a time lag, as their energy hedges won’t have caught up with such a fast move lower in the commodity quite yet – Easyjet was up almost 6% by close of play yesterday as a result.

3- More oil price drops could come

Yesterday’s price fall is predicted by many analysts to continue, with $60 per barrel being cited as the possible bottom of this trade. CEO of Russian oil giant Rosneft, Igor Sechin, thinks this is where it’s heading, which would be devastating for his company. He is currently in a mountain of debt thanks to the purchase of TNK-BP last year and now can’t finance that debt because of sanctions restricting his financing to 90 days. The oil price has also hammered top line revenues which makes that financing even more expensive. Whether Mr Sechin’s comments will resonate with Mr Putin is yet to be seen, but something will need to be done if Russia’s second largest company is to stay viable.

Elsewhere, Mario Draghi was on the wires yesterday calling for greater fiscal union within Europe. Mr Draghi said “that a sound fiscal fiscal framework is necessary in a monetary union goes without saying” but worries that countries aren’t doing enough to meet their individual parts of the bargain. Mr Draghi wants to try and ensure that budget plans for 2015 are stuck to this time round, particularly as he will be the one holding the government’s debt when the ECB start QE and it would be reassuring to hold the IOU’s of a fiscally responsible country. German bond yields fell to their lowest ever level as the market geared up for the ECB to start printing and purchasing. With QE already being priced into the market, the only two question marks are when does it start and how much do they print?

It’s Black Friday here in the US and even most dedicated traders like myself are considering to take their trades outside of the trading platforms and into the shopping malls… So we are not expecting much movement on the forex dance floor for the remaining of the trading day.

Intraday Forex Technical Levels

EUR/USD 4-hour: Teasing the resistance level.

Invest Diva positioning: Long positions above 1.2487 with targets at 1.2563 and 1.2624 in extension.

Technical reasons why: The pair is teasing the 23% Fibonacci level and the upper boundary of the Ichimoku’s cloud at 1.2487. The RSI is around the neutrality area.

Alternative Scenario: Below 1.2487 look for further downside towards 1.2363 and 1.2299.