Oil Inventories In, USD Mixed Vs The Majors


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?

majors
USD/CAD, Daily Chart

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.



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