Fundamental and Technical Analysis
Another surprise by China as they cuts interest rates and reserve requirement ratios: China continues its attempt to stimulate the market through interest rate and reserve requirement ratio cuts. This caused the US Dollar Index to spike towards 97 just before the end of last week. Oil and gas prices undergo another round of sell off as a result. Contrary to the price drops, we would think that if the Chinese economy does gain strength, prices could be increasing in the longer run.
US Federal Reserve FOMC meeting held this week, interest rate decision will be announced on Thursday, 2am (Singapore Time). This will be followed by US preliminary Q3 GDP which will be released at 8.30pm (Singapore Time): The coming FOMC meeting would be the 2nd last one for the year. Although this meeting is expected to be a non-event, it is highly anticipated that the Federal Reserve would be hinting if we could be seeing a rate hike in Dec’15. It would seem that the hope for a 2015 rate hike is fueled by the reason that the Federal Reserve needs to maintain investor confidence and thus, would proceed with a hike. This angle is growing weaker as the Federal Reserve seems adamant on focusing on the economic data. Thus, only unless we are seeing better data from now till Dec’15, we could very well see 0.25% interest rates as we move into 2016. Preliminary Q3 GDP would likely be taken as a good indication of when the Federal Reserve would be hiking rates. If Q3 turns out good, we may see more inclination to hike rates in Dec’15.
Both WTI and Brent decreased last week with WTI dropping slightly harder than Brent. This is especially so towards the end of the week, causing spreads to widen again. WTI’s drop could be displayed by non-commercial traders cutting their bullish bets by 1.2% as reported by CFTC. As expected, prices has maintained above the range of $47.86 for Brent Dec’15 and slightly around $44.62 for WTI Dec’15. For this week, we would think that it would be the US turn to move markets. With a scheduled FOMC meeting and the Q3 GDP to be released, volatility would be expected. We re-adjust our support for WTI and Brent Dec’15 to $44.15 and $47.46. We do not anticipate much change to the Federal Reserve’s stance and thus, would think that the US Dollar Index is not expected to move upwards. Therefore, would expect prices to end the week above the supports given previously.
Prices continued declining as inventories move towards 2012 levels. We continue to believe that exceeding that level is significant and could be seeing more drops. However, for the start of the week, we could see some retracements towards $2.596 (38.2% Fibonacci level). This increase should fade with robust inventories on Thursday, bringing prices back to the low of $2.483. (Read Report)
Source : Phillip Futures Pte Ltd