Thursday, September 10, 2015

US dollar sold off yesterday | Strength of selling seen in Crude Oil price action after inventory data

The US dollar was sold off from the start of the North American trading session yesterday. The chart above shows the action against the Euro (the rising EURUSD chart indicated a weakening dollar), but the rot also set in against the pound sterling, the commodity currencies (Aussie, Kiwi and Loonie [Canadian dollar]), the Japanese Yen, Swiss franc and gold.

The cause of all this greenback negativity seems to be the conviction among market participants that the Federal Reserve will not raise rates or even announce a start to rate rises in next week’s FOMC Monetary Policy Statement. The September meeting has long been touted as the most likely one for a start to interest rate rises if they are to be in place this year, but indications now are that the members of the committee are not in any way united on the way forward under this heading.

The Stop Loss (SL BID) line in the chart above indicates a long trade that the Mandelbrot routine got into at the 1.1203 price level. This trade was still going strong at the time the chart was captured for this commentary.

Strength of selling seen in Crude Oil price action after inventory data

It is interesting to observe the dollar price action in relation to Crude Oil yesterday. The chart above shows Light, Sweet Crude for October delivery. It had responded to the dollar weakness by increasing in price (a lower dollar is typically reflected in rising oil prices). However, the US Energy Information Administration (EIA) weekly report on oil inventories in the US, which was released at 16:00 GMT yesterday, showed an unexpectedly large increase in stocks in storage. Normally this news would be calculated to weaken crude prices, and indeed in did on this occasion too, but only for about 10 minutes. Then oil began to rise again on the back of the general dollar sell-off. The chart above indicates the oil price performance immediately after the report release.

It can be seen in the top chart that the EURUSD pair also accelerated upward immediately after this news release.

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