No Dry Well For Oil Traders
Today’s Spotlight Market
With WTI prices down over 45% for the year, so-called commodity currencies have really taken a beating — but none more than the Russian Ruble. The currency is down over 50% for the year, despite a short-lived bounce earlier this week after the Russian Central Bank raised the lending rate to 17% from 10.5%. Russia still has a sizable cache of foreign reserves, but has already gone through over 20% of them trying to defend the nation?s currency. With its huge dependency on Oil sales to fund the government and few signs that the bearish trend in Oil prices is nearing an end, traders should be prepared for further actions by the Russian governments, even potentially currency controls, to help stop the Ruble?s descent.
Fundamentals
?Will they or won?t they??, that is the question on traders? minds today, as analysts parse through the language in the statement that follows the end of the Federal Reserve?s December FOMC meeting. The biggest change that is expected is the removal of the phrase ?considerable period of time? as a signal to the market that the Fed is preparing to move towards a more ?normal? monetary policy and the eventual move towards raising interest rates, most likely starting sometime in the middle of 2015. The Fed appears to be seeing enough positives in the improvement of the U.S. economy to prepare for the eventual raising of rates, despite the recent increase in market volatility spurred on by a sharp decline in Oil prices and a return of volatility to the global equity markets. While some pundits view lower Oil prices as a sign of slowing global economic growth and a negative for global equity prices, one has to wonder how cheaper energy prices is a negative for most businesses and consumers outside of overleveraged energy companies and nations such as Russia and Venezuela, which need Oil prices closer to $100 per barrel in order to fund the nations? budgets. The steep decline in Oil prices is only partially due to increased supplies and moderate global demand, but it is important to be cognizant of the large speculative long positions in the Crude Oil futures markets and any long liquidation selling that has added ?fuel to the fire? of the Oil price decline.???? ?
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for Crude Oil, we get a better ?long-term? view of the market, and we notice that the recent sell-off has not yet touched the uptrend line drawn from the major lows made back in 1998, when Crude was trading near 10.00 per barrel. The speed of the recent price sell-off does bring back memories of the 2009 price decline, but even then prices rebounded from near $30 per barrel to over $100 in a relatively short period of time. The 14-week RSI is reading vastly oversold, with a current reading of 11.96. Even a ?minor? short-covering rally could see prices trade back towards $70 per barrel, without negating the recent bearish momentum.? Tuesday?s low for the January futures at 53.60 is now seen as support for the lead month futures, with resistance found at 65.55.
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