Equity markets mixed, WTI oil prices topping their range again, ASX futures 11 points higher

It's a little comical to watch the WTI oil price rally following comments from US Energy Information Administration (EIA) last night. Only a week ago were we shown how seriously the market takes its forecasts as a whole, when traders quickly sold the rally following talks of an April/May inventory peak. While the headlines will read, "EIA slashes forecasts," these outlooks are still forecasting US$73 per barrel over the next five years and the reality is that to predict five-year oil prices is a fool's game. As is the case in iron ore markets, big players are trying to break the oversupply coming from newer producers - in oil's case this is partly to avert the pace of transition to alternative energy sources and they will play hard given what is at stake. Again, I would urge traders to look to the short trade as WTI reaches the top of its short-term range once again. In today's first chart you can see the market for WTI jumping to US$53.09 and I can only assume that a few traders have gotten excited about the prospects of recovering oil prices following this report. Why the focus wasn't on the progress being made in the US with mounting congressional support for lifting sanctions for Iran I do not know; and given Iran has stores of oil that it has been forced to hoard since its exports were shut down, I would think that the threat of this new supply (a congressional deal with bi-partisan support is slated to be finalised by 30 June) and the speculation that Obama would support the deal might have overshadowed the EIA's fantasy forecasts. For those traders who understand technicals and are willing to manage their own trades, consider short entries at market (US$53.09) for the front month OILUS contract with stops around US$54.50.

Today's second chart shows that the rally in the US dollar (and subsequent sell-off in the EURUSD pair) did get a little exhausted last night. As speculated in yesterday's wrap, selling resistance in the US dollar index and buying support for the EURUSD did prove too tough to crack and traders bounced off the key levels there to put an end to the week-long rally/sell-off in the US dollar/euro.

All eyes today will be on Chinese GDP numbers. They will print at 12pm Sydney time and the market is expecting 7%, a 0.3% drop from the previous quarter. There is a lot of talk about India at present, given the contracting growth in Chinese GDP, but it should be remembered that Chinese GDP per capita and GDP as a whole is around five times that of India. So while India might prove an interesting outright trade, it should not be seen as a replacement for diminishing Chinese growth in the region; rather, it should be remembered that 7% (or 6.5%, or 6%) growth in the US$10 trillion Chinese economy will remain the core of regional economic growth and so long as the contraction to a normal rate of growth (~3%) is steady, we can continue to be extremely grateful for having this powerhouse in the region.

Today‚Äôs charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to open a Rivkin Trader account now.

Upcoming economic announcements: Chinese GDP out at 12pm, German CPI out at 4pm, ECB rate decision and press conference 9:45pm/10:30pm, Canadian rate decision out at 12am, all Sydney time.

This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice and dealing services on securities, derivatives and superannuation (SMSF). Rivkin also provide SMSF administration and accounting services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.