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Oil up on OPEC compliance crackdown

USD/JPY – Monthly Candlesticks
Source: GKFX / MT4 (September 16, 2020)

USD/JPY is testing the bottom of its long-term triangle again with a move below 105, which on previous occasions, including 6 weeks ago have seen sharp drops and equally sharp rebounds. If/ when this level breaks down, the move lower could be fast and substantial.
 

TAKEAWAYS


•    GBP/USD: Bank of England talks up negative rates again
•    USD/JPY drops below 105 in post-BOJ meeting drop
•    European shares drop as WHO warns of ‘very serious situation’ 
•    Gold slides after Fed offers no clear signal on stimulus
•    DAY AHEAD: UK retail sales, Canadian retail sales, US Michigan consumer sentiment
 

GURU WISDOM


“When you invest, you are buying a day that you don’t have to work.” – Aya Laraya
 

MARKETS


The 2% oil price gain added to a 4% gain on Wednesday, taking the price of Brent crude oil up $4 per barrel in the space of 3 days. The price of gold dropped over $20 per oz after the Federal Reserve didn’t telegraph any new easing measures but finished off its lows.

The US dollar turned sharply lower late Thursday after the Bank of Japan and Bank of England kept interest rates unchanged and failed to match the dovish forward guidance from the Federal Reserve. EUR/USD fell to a 1-month low but rallied over 100 pips off its low to 1.185.

Wall Street rolled over again as tech stocks continued their correction but leadership from other sectors limited the blow to the major averages. Shares in Europe dropped amid its highest number of daily virus cases since the pandemic began. Stock markets in Asia were soft, led lower by Hong Kong’s Hang Seng in reaction to the various central bank statements.
 

OPEC compliance


Oil prices have recouped over half of September’s drop in the past three days as traders reacted to more positive news on market supply. OPEC said it would crackdown on nations exceeding their quotas with the UAE singled out by some insiders as a culprit. The cartel also said it could hold another extraordinary meeting in October if oil prices continue to fall. The oil price remains down on the month amid lacklustre demand given the big decline in global travel.
 

European cases


The rise in coronavirus cases in Europe is worrying officals at the World Heath Organisation and the European Centre for Disease Control (ECDC). Weekly virus cases have topped 300,000 patients, higher than when the pandemic peaked in March. It is likely no coincidence the rising cases have come as the weather begins to cool. Investors have tended to reward assets from countries with the best virus results. 
 

Central banks


There was not much to write home about from the meetings of the Bank of Japan and Bank of England, and that might be the point. The central banks are all in ‘wait-and-see mode’ after huge stimulus efforts in the spring. The Federal Reserve took the most decisive action then and is now giving the most dovish forward guidance, which is now weighing on the US dollar.