Oil-based Currencies Rally on Middle East Geo-political Conflict - Forex Anatomy

Oil-based Currencies Rally on Middle East Geo-political Conflict

All roads are pointing to safety for most risk-oriented assets following a weekend of geo-political developments in the Middle East, and trade war concerns that boosted demand for safe haven currencies, like the Japanese Yen, the US Dollar, and Swiss Franc.

 

Investors are still uncertain about the market’s reaction and the political outcome of this weekend’s drone attack on Saudi Arabia’s largest crude-processing facility in Abqaiq. Crude oil prices, in both Brent & WTI, spiked above key price handles, and continue to remain strong during most of the trading session. This, in turn, has caused oil-based currencies like the loonie (CAD) and the NOK (Norwegian Krone), to rally on speculation that a lower oil supply will continue to encourage higher oil prices.

 

 

For today’s trading webinar, we discussed the Greenback & Canadian dollar’s response to this weekend’s news and our expectations of volatility during a heightened week of central bank monetary policy announcements. Since last week’s ECB meeting failed to meet the market’s demand for greater stimulus, investor’s attention will now be turned to the FED (Federal Reserve Bank), BOJ (Bank of Japan), BOE (Bank of England), SNB (Swiss National Bank), and the Norges Bank, which will release their policy statements during the last half of the trading week. The Fed is expected to cut interest rate by 25 basis points to a target of 1.75%-2.00%, which has already been priced into the dollar’s value and its exchange rate with other currencies. This may set the market up to be disappointed on Wednesday, and we may see the dollar strengthen and high-yielding assets drift lower if the central bank is not more accomodative than anticipated.

 

For most of the webinar, we reviewed price action in US Dollar Index (DXY), EUR/USD, CAD/JPY, AUD/JPY, and GBP/AUD to identify technical setups that were forming in the market for trade entry.

 


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About the Author Marvin Perry

Marvin Perry has been an active trader within the Forex market since 2010. He attended the University of Illinois in Urbana/Champaign, and graduated in 2002 with a double major in Cell and Structural Biology and Chemistry. He currently serves as an FX instructor & Quantitative Analyst for the Forex Anatomy Private Trading Community called "The Lab", where he conducts live weekly trading webinars & instruction on Fundamental Analysis & Inter-Market Interpretations of dynamic asset classes and their influence on currencies.

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