OPEC Set To Reduce Oil Production? NOT Nov. 27, 2014
Oil Prices Set To Drop Further on NO Production Cut
The OPEC meeting is later today so it would be premature to say there will definitely not be a cut in production but when the Saudi Oil Minister says, “no one should cut production and the market will stabilize itself, Why should Saudi Arabia cut? The U.S. is a big producer too now. Should they cut?” then probabilities go down substantially.
One might wonder why I mention oil in the forex commentary, the reason is more than just helping to educate readers even though that is a good thing. Mainly its due to the effect energy prices have on any potential recovery around the world. Not to mention this puts doubt on the theory that the Saudis are in cahoots with the US to cripple Russia with falling prices like Ronald Reagan did to help end the Cold War. What it does say is that demand is low since the so called recovery isn’t really happening no matter how much they cook the books. However this is good for the potential recovery since its in effect a tax cut for the middle class that will have more disposable income to purchase goods rather than sinking it into the gas tank in order to get to their three part time jobs.
However there are a couple more issues on the table that comes with lower oil prices. For starters there are several producers around the world that need oil above $100 in order to turn a profit on production, Canadian oil sands being one along with any deep ocean fields putting Venezuela and Brazil in a pinch. The shale producers in the US need it even higher considering they haven’t been able to see any well not drop in production by 90% within the first year or so. Therefor there are alot more producers hurting at these prices than just Russia. Somehow the idea of low prices are due to a deal to cripple them dont hold much water does it?
Here is one idea. The US shale boom has been proven a farce and they need a way out other than admitting they were wrong and stupid. Dropping oil prices making it unaffordable and seeing the shale companies go under eventually being bailed out by the Fed is a much better plan since they will have oil to blame. Keep in mind the shale companies are owned by government cronies and you get the picture. Its brilliant.
Lastly I wouldn’t look for or expect the Saudis to cut production until price dips below $50 a barrel. Remember they didn’t cut production in 2008-09 until price dropped to the mid $30s range. Plus its well known that the Saudis still do well with oil around $50 so it only makes sense that they kick the ball in the US court and see what they do.
EUR/USD Makes Third Intraday Push
Now that the EUR/USD has made three intraday pushes we should see some sort of reversal even if they are going to push it higher. Having said that when they are pushing intraday like this it raises the probability for extended pushes as well. The topping formation isnt all that clear as well, I prefer to see hourly pins tested rather than the set of legs. Having said all that the safest entries will be from yesterdays high or low but I will be open for the long at 1.2486 if they show they wont let it pass there during the London session. It would also be better to see them test there during Asia and pull back first. Otherwise I will be waiting for the test of the extremes before trading this pair today.
GBP/USD First Long Term Push From Range
The push out of the range on the GBP/USD was a little surprising until I consider the bad data from the US yesterday. Today I will be bias for the next push upward but if they cant turn it at the 1.5768 level they will most likely run to the daily high at 1.5734 before any attempt to break the highs. The Asian lows will likely be a valid level during the London session but I would like to see them widen the range a bit or leave the Asian box closer to the highs before hitting break out traders at the current Asia lows. Otherwise I will be open for the short from the psych 1.5800 level but would be best to see them run stops above 1.5804 first.
EUR/JPY Opens Up Direction
Since the EUR/JPY couldn’t make the second push yesterday it pretty much throws out any potential plan they have on direction for this pair. The same applied yesterday with the probability going down but still there. Now they could go either way. At this point the best long will be from 146.61 but taking an entry warrants some caution with the 146.38 just below. Otherwise the short potential is only from 147.39 preferably with a stop run above. I am watching the 147.00 level right now since there has already been conviction below the US/London overlap lows yesterday but does not look at all promising for a set up. If it does creep back above then I will expect London to test the highs before running to test the 146.61 level if that’s their plan today.
Forex News Today
The only high impact news during the London session today is the German Unemployment data before a Super Mario speech a bit later. As long as it don’t miss big they will likely wait for Draghi to have his speech to move price. What they will be looking to hear is something on deflation fears. If he does mention serious concerns again along with any potential action he will take to fight it then the Euro should weaken. How much is a different story since it will depend on action he actually takes rather than the threats he has made before. The real kicker will be German CPI later if it drops below zero. However Jens Weidmann has his say just before the release so a small bump below zero may not mean much since I am pretty sure he will again mention how the ECB can’t buy sovereign bonds.
The US is on holiday for Thanksgiving but there is a slew of Japanese data for Asia session traders Friday morning. The big ones will be CPI, Industrial Production and Retail Sales. If CPI disappoints big than any small improvement from the others will likely be ignored unless Retail Sales misses rather high. In that case they will cancel each other out somewhat.
MY APOLOGIES FOR THE BROKEN VIDEO OF INSIDE JOB IN THE COMMENTARY. I DIDNT THINK I WAS COPY WRITE INFRINGING WITH AN ITALIAN VERSION ALREADY ON YOUTUBE. HOWEVER YOU CAN STILL WATCH IT AT THIS LINK. STILL A MUST SEE!
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