The Week Ahead

Previous week: 09 January 2017 – 13 January 2017

US Retail Sales (m/m)—13 January 2017 Friday

December’s US Retail Sales m/m came in at +0.6% which is slightly under the +0.7% expected. When looking a little deeper, we see that the Retail Sales excluding autos and gas was flat (zero) on expectations of +0.4%. Basically the increase in expenditure was in cars and fuel which does not seem like a bullish economy.

Coming week: 16 January – 20 January 2017

UK CPI y/y—17 January 2017 Tuesday

December’s UK CPI figure is expected to come in at around 1.4% which is higher than 1.2% figure of December. The pickup in CPI in 2016 had been mostly due to the cheapening of the British Pound which was a consequence of the Brexit referendum.

Prime Minister Theresa May Speaks—Tuesday 17 January 2017

It seems that every time PM May speaks (about Brexit), the British Pound would have an increase in volatility, mostly in the downward direction.

US CPI m/m—Wednesday 18 January 2017

Overall CPI figure for December is expected to come in at +0.3% which is higher than November’s figure of +0.2%. Core CPI is expected to come in at +0.2% in line with previous month of +0.2%.

Bank of Canada Overnight rate—Wednesday 18 January 2017

The Bank of Canada is expected to keep interest rate unchanged at +0.50%. It has kept its interest rate unchanged at +0.50% since July 2015 (1.5 years) which corresponds to 11 consecutive central bank meetings. With oil prices hovering at $50+ per barrel and no significant deterioration of the Canadian economy, a rate cut or hike is unlikely.

ECB Minimum Bid Rate + Mario Draghi Press Conference—Thursday 19 January 2017

The ECB is expected to keep all their policies unchanged. The first reason is because the Eurozone economy have not deteriorated significantly to warrant a policy change. The second reason is that the ECB would like their recent changes in asset buyback structure to take effect in the European economy. Well with the ECB, we will never know what to expect because they are always so unpredictable in their language and policy changes.

 

Trade Ideas

WTI short

Whilst the OPEC nations agree to cut production which led to a rise in oil prices to $53 a barrel, the American opportunists decided to repay the compliments by restarting their oil rigs. This week, the Baker Hughes US rig count halted its 14 weeks of increase. It decreased by 7 from 529 to 522.

http://www.investing.com/economic-calendar/baker-hughes-u.s.-rig-count-1652

http://www.zerohedge.com/news/2017-01-13/rig-count-unexpectedly-declines-following-biggest-crude-production-surge-20-months

**By scrolling through the news feed, I noticed much bickering among OPEC nations and also among non-OPEC nations with regards to levels of production. Everyone wants higher oil prices (and reminsinces the good o’ days of 100 dollar oil). Now that oil prices had halved in price, oil producing nations would still be interested in maintaining their old level of oil revenue and market share. They do this by pumping more oil out of the Earth’s crust. When the OPEC agreed on a cut in production, the non-OPEC nations, seeing a potential opportunity to chip away at OPEC’s (not too dominant) market share decided to crank up their oil production. This is called the “tragedy of the commons”. In the end, all the oil producing nations lose because no one wants to be worse off to benefit the rest.

https://www.youtube.com/watch?v=WYA1y405JW0

When looking at the weekly chart of WTI, we see that WTI has trouble breaking through the $53 resistance. When focusing at the last 6 weekly candlesticks, we see that they are small candlesticks indicating a contraction in volatility. Among the six candlesticks, we do see that 2 of them have a long upper wick indicating that the oil market is rejecting higher prices. Oil is taking resistance at $53 a barrel. However, when we look at the last weekly candlestick, we can read it in two different ways. The price of oil is taking support at around $51 zone and is bullish. The candlestick resembles a hanging man candlestick established at the top of the uptrend and is a bearish signal. My opinion is to stay short unless the market proves otherwise by breaking above $55 high.

ed 1

When looking at the daily chart of WTI, we see that oil may be taking support at around $51.50 and selling off at resistance at $53.50. At the moment, oil seem to be trending sideways. My opinion is to stay short unless the market proves otherwise by breaking above $55 high.

ed2

USD/CAD long

1.31 seems to be a number that acted as strong support and resistance many times in the past months. On Thursday 12.01.2017, we see that USD/CAD established a large bullish pinbar with a long lower wick. Based solely on price action together with support and resistance, buying at 1.31 and taking profit at 1.36 double top resistance seem to be a great probability bet. A drop in oil prices will be favourble for a rise in USD/CAD.

ed3

 

 

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