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Fundamental and Technical Analysis
US Q3 GDP and Durable Goods Orders will be released on Tuesday, 9pm and Wednesday, 9.30pm respectively (Singapore Time): The week ahead is expected to be rather quiet with the festive season just around the corner. We could be seeing some volatility to the USD strength as a result of US economic data like US Q3 GDP and Durable Goods Orders being released. Judging from how the Federal Reserve decided to hike rates last week, it is very likely that these data would at least be decent. This could cause the US Dollar Index to move above 99. However, to move above 100 would be unlikely.
CFTC reports increased bullishness for non-commercial side by 1.4%; indicating that funds are supporting prices after prices fell: The increase in bullishness from funds is likely supporting prices from falling further. Even for commercial side, we are not seeing much of an increased in short positions which is a good sign for oil bulls. Moving forward, with funds increasing their bullishness, it is very likely that prices would be maintaining strong at current supports.
Prices take another hit with stronger than expected US crude oil inventories followed by the increasing USD strength with the US rate hike. This caused prices to test new lows and struggle to maintain above 2008 lows. Although this week, we may see some downwards push to oil prices as a result of the US Dollar Index, we highly doubt that prices could move much lower. There are 2 indicators which are hinting that oil prices would be receiving support at current levels. One of which comes from the growing bullishness from non-commercial traders. The other indicator would be the narrowing spreads between WTI and Brent. This was previously seen when prices were testing lows earlier in the year and with history repeating itself, we would think that this indicates the end of a price rout for now. Hence, we would think that prices should maintain current support for WTI and Brent Feb’16 at $32.4 and $36.2. These are the lows seen during the 2008 Financial Crisis. These supports could be tested again if US crude inventories turned out larger than expected. However, continue to find it highly unlikely.
Prices took another slump after US inventories continue to display strength in the midst of a warmer winter. We believe that only unless we are seeing inventories drop below 2012 levels, which should be signal of an easing of supply, prices would not be recovering. Considering the 8% drop we saw last week, we expect prices to recover slightly at the start of the week. However, how prices would end the week would likely be dependent on the US inventories and how the US dollar would be strengthening. (Read Report)
Source : Phillip Futures Pte Ltd