Oil Inventories In, USD Mixed Vs The Majors
Shain Vernier • 1 min read
Today’s EIA Crude Oil Stocks report is in and inventory growth appears to be tapering off. Last week’s supply change came in at -0.745 million barrels, well beneath expectations (4.147M). The negative figure is a good sign that demand and production cuts are having a positive impact on the March/April supply glut. While most of the majors are unaffected, the USD/CAD is driving higher.
In addition to the EIA Crude Oil Stocks release, the U.S. premarket hours featured several inflation metrics. Here is a quick look at the data:
Event Actual Projected Previous
PPI (MoM, April) -1.3% -0.5% -0.2%
PPI (YoY, April) -1.2% -0.2% 0.7%
Core PPI (MoM, April) -0.3% 0.0% 0.2%
Core PPI (YoY, April) 0.6% 0.9% 1.4%
This group of figures echoes Tuesday’s CPI release and lagging inflation continues to be a problem. Although the FED is denying all suggestions that interest rates may go below zero, one has to wonder if negative rates are a possibility. According to the CME FEDWatch Index, a prime rate of 0.0%-0.25% has a 99.4% chance of being reality until at least March of 2021. While this is an extremely dovish outlook, the Greenback continues to perform well versus the majors.
Majors Trade Sideways, USD/CAD Rallies Modestly
The USD/CAD is in the midst of a two-day winning streak. Will bidders make it three?
Here are the key levels to watch in this market for the near future:
- Resistance(1): 38% Retracement, 1.4164
- Support(1): Bollinger MP, 1.4035
- Support(2): Daily SMA, 1.4018
Bottom Line: In the event that the USD continues to show strength against the majors, a shorting opportunity for the USD/CAD will come into play. Until elected, I’ll have sell orders in the queue from 1.4159. With an initial stop loss at 1.4176, this trade yields 25 pips on a sub-1:1 risk vs reward ratio.