The extremely quite and crab-like sideways moves continues for Mr. Euro against Ms. USA (i.e. the EUR/USD pair) and as we covered yesterday, this could just be the calm before the storm.
But the question is, is the worst yet to come?
Looking at oil prices which dropped again today, some analysis believe so. Another factor could be the result of today’s all-day Eurogroup meetings held in Brussels, which has all the big shots in the eurozone such as the Eurogroup President, Finance Ministers from euro area member states, the Commissioner for economic and monetary affairs, and the President of the European Central Bank attending. They have been discussing a range of financial issues, such as euro support mechanisms and government finances since the beginning of the London session, and it’s been going on. The meetings are closed to the press but officials usually talk with reporters throughout the day, and a formal statement covering meeting objectives may be released after the meetings have concluded.
Since the Eurogroup coordinates economic policies of the 19 euro area member states, no wonders all traders are counting seconds to find out about their initiatives and decisions because they can have a widespread effect on the Eurozone’s economic health.
Back to oil… Tom Kloza, chief oil analyst at Oil Price Information Service, predicted that oil prices would bottom during the second quarter of the year “simultaneously to one of the expirations of the WTI contracts.”
He warned that the price of West Texas Intermediate crude could be in the $30s at some point in the second quarter. Now that is alarming. As the good Invest Diva Community already knows, oil prices are counter-correlated to Ms. USA’s moves on the forex dance floor which means (drum rolls) a stronger dollar.
Mr. Kloza noted that there were about 500,000 wells in the U.S. that produced fewer than 15 barrels of oil a day. “We’re gonna fill up in storage, and it doesn’t appear that there’s any way around that,” he said. “Some of the additional crude oil from the water will come to the United States simply because we have the facilities to store it.”
This makes sens from another political aspect; Russia. Mr. Putin is hoping for the prices to go back up, and the US is eager to not let that happen.
So taking the loop back to EUR/USD, that itself would mean more downfalls for the pair.
But just in case the eurogroup come up with a super amazing solution for the eurozone, then we would see struggle between Mr. Euro (trying to push the pair up) and Ms. USA (trying to push the pair down) which would ultimately result in even MORE sideways dance moves.
It’s a bank holiday today in Japan, so the oil price news had it direct effect on the USD/JPY pair with Mr. Japanese Yen sleeping and Ms. USA pushing the pair up.
Tomorrow should be more interesting with Aussie jobs reports, Bank of England’s inflation report and US retail sales/ unemployment claims all spread out throughout Asian/ London and New York trading sessions.