No agreement in Doha, Oil collapses

Forex News and Events

SNB intervenes to weaken the Swiss Franc (Yann Quelenn – Market Analyst)

The Swiss National Bank has now no choice than to defend the CHF against the still weakening single currency. This week, total sight deposits again have increased by CHF 2.8bn to 486.4bn, which is about the same increase than last week when total sight deposits sharply increased by CHF 2.67bn. There is now growing evidence that the SNB is fighting against the overvalued the Swiss Franc.

Indeed, downside pressure on the EURCHF are set to increase due to the continued ECB monetary policy, fears of Brexit and Grexit. Even if Thomas Jordan said last Saturday that the SNB still has decent room to “fight significantly overvalued Franc”, we actually do think that the Swiss central bank is trapped and that there are limited tools remaining to weaken the CHF. Negative interest rates cannot go much lower or there is a non-negligible risk of a bank run and we consider that a peg would be way too expensive to maintain as the risk of a euro collapse could trigger unlimited losses.

For the time being, Swiss officials are in a wait-in-see mode, with slight intervention. They hope for the best and are not prepared for the worst. We remain bearish on the EURCHF.

Talks fail Oil drops (Peter Rosenstreich - Head of Market Strategy)

Talks in Doha failed to produce any agreement to freeze oil production triggering crude to fall over 4.0%. Energies tight correlation to equity prices suggests that US stock markets will be hit hard today (expect heavy selling in oil & gas sectors). The Qatari summit (OPEC and non-OPEC) ended with no final accord as Saudi Arabia wouldn’t decrease production without commitment from other major producers including Iran. Last week Iran announced that the nation would not send representors to the weekend meeting, significantly lowing expectations for an agreement. Rumors had been circulating that Russia, Qatar, Venezuela and Saudi Arabia had approved a draft agreement. Yet according to reports as the last minute Saudi pulled out of any commitment as Iran remained outside the pact. The lack of accord undoubtedly highlighted the political divide between Saudi Arabia and Iran which undermined economic considerations. This was an opportunity for OPEC to repair its tarnished image as the preeminent influence on oil prices. In the short-term the bearish disappointment by OPEC will negatively impact investor’s sentiment around commodities. We suspect commodity linked currencies such as CAD, AUD and NOK will struggle to find buyers. In the EM space our eyes will be on RUB for a heavy bearish reaction. In addition, with IMM data indicating a yearly low in USD long positions we could see the maligned USD rally back further.

Not so bearish on Oil

However in the mid-term, we are less bearish on oil prices than most analysts. Prices depend on demand as much as supply and recent economic data specifically from China indicates the demand backdrop has stabilized. Global growth remains challenge but the fear so deflations risks look to be fading. Domestically China home prices in China increased again in March. China house prices in 62 out of 70 cities increased on an m/m basis. Finally, the theory that supply in select producer could easily turned on and off looks to untrue (i.e. capping upside moves). Collapse of CAPEX (which include maintenance) and tighten of credit for energy producers indicates a meaningful lag between higher prices and return of additional supplies

Today's Key Issues	Country/GMT
Mar New Motor Vehicle Sales YoY, last 2,30%, rev 2,50%	AUD/01:30
Mar New Motor Vehicle Sales MoM, last -0,10%, rev 0,00%	AUD/01:30
Bloomberg April Eurozone Economic Survey (Table)	EUR/06:30
15.avr. Total Sight Deposits, last 4,86E+11	CHF/07:00
15.avr. Domestic Sight Deposits, last 4,24E+11	CHF/07:00
Feb Int'l Securities Transactions, last 1,35E+10	CAD/12:30
15.avr. Bloomberg Nanos Confidence, last 55	CAD/14:00
Apr NAHB Housing Market Index, exp 59, last 58	USD/14:00
1Q CPI QoQ, exp 0,10%, last -0,50%	NZD/22:45
1Q CPI YoY, exp 0,40%, last 0,10%	NZD/22:45
Apr Rightmove House Prices MoM, last 1,30%	GBP/23:01
Apr Rightmove House Prices YoY, last 7,60%	GBP/23:01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Peter Rosenstreich

EURUSD is pushing slightly higher after recent weakening. The pair is moving within an uptrend channel. Hourly support can be found at 1.1144 (24/03/2016 low) and resistance at 1.1465 (12/04/2016 high). Stronger support is located a 1.1058 (16/03/2016 low). Expected to show further increase. In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 ( holds. Key resistance is located at 1.1640 (11/11/2005 low). The current technical appreciation implies a gradual increase.

GBPUSD is riding downtrend channel near the hourly support at 1.4006 (04/06/2016 low). Hourly resistance is given at 1.4320 (04/04/2016 high). Expected to show further weakening. The long-term technical pattern is negative and favours a further decline towards key support at 1.3503 (23/01/2009 low), as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USDJPY is now back to bearish and the pair is now heading toward hourly support at 107.68 (07/04/2016 low). Hourly resistance can be found at 109.90 (07/04/2016 high). Short-term selling pressures are still on. Expected to show further weakening. We favour a long-term bearish bias. Support at 105.23 (15/10/2014 low) is on target. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems now less likely. Another key support can be found at 105.23 (15/10/2014 low).

USDCHF is moving sideways without massive volatility. Hourly support can be found at 0.9499 (12/04/2016 low). Hourly resistance is located by upper bound of the downtrend channel and by 0.9788 (25/03/2016 high). Expected to show further increase as short-term selling pressures do not seem strong. In the long-term, the pair is setting highs since mid-2015. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias.

 

Resistance and Support:

EURUSD	GBPUSD	USDCHF	USDJPY
1.257	1.4668	1.0093	113.80
1.1714	1.4591	0.9913	112.68
1.1465	1.4348	0.9788	109.90
1.1262	1.4185	0.9676	109.34
1.1144	1.4006	0.9476	107.63
1.1058	1.3836	0.9259	105.23
1.0822	1.3503	0.9072	100.82