[European hotspot] US dollar regains 101 mark, Iraq is optimistic about pushing up oil prices

Huitong.com November 29th - On Monday (November 28th), the US dollar index rebounded, regaining the 101 mark and refreshing the daily high to 101.60, as the spread of European and American bonds spread and the Fed's rate hike is expected to push up the US dollar. The oil price rose by more than 2%, and the commodity currency strengthened. The rebound in spot gold was blocked. Earlier, the dollar rebounded to around $1197.72, but as the dollar regained its decline, the price of gold fell again below $1,190. In view of the possibility that the dollar will continue to rise, and the gold ETF continues to decrease, It is expected to limit the rebound of the gold price. In the crude oil market, international oil prices bottomed out, and doubts about production cuts once caused oil prices to hit a new low for a week. However, Iraq’s optimism still provides support for oil prices, and the market wait-and-see mood is growing.


[List of major market conditions]
In the foreign exchange market: the US dollar index bottomed out, regaining the 101 mark, refreshing the daily high to 101.60, due to the spread of European and American bond spreads and the Fed rate hike is expected to push up the US dollar. The oil price rose by more than 2%, and the commodity currency strengthened. FX678 understands that most foreign exchange investors expect the dollar's rally to continue. But the US Thanksgiving holiday, coupled with the flow of corporate funds before the end of the month, and some of the risks surrounding the market in the first half of December, have made some people profitable now. “The recent consolidation has caused many investors to wonder if it’s time to sell dollars,” said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management. “There is no doubt that the dollar’s ​​gains are a bit ahead of the game, and the escape from the top is attractive. Just a small fall, means that the best thing to do is to buy dollars when it falls back, until Fed Chair Yellen tells us another way.” Huitong.com pointed out that the dollar adjustment momentum has been turned on, despite the rebound in European time, but there is no Change the risk of adjustment.

The euro against the dollar retreated all the gains, refreshing the daily low of 1.0562, as the spread of European and American bond yields dragged down the euro. Investors remain cautious about the euro before the Italian constitutional referendum this Sunday. A foreign exchange trader in London said that the euro's rebound was temporarily blocked, but still optimistic about its upswing in the next few days, the euro against the dollar fell more than 5% in the past three weeks.

European Central Bank President Mario Draghi said that the European Central Bank policy is a key element in the current economic recovery. The euro zone's economic growth rate is moderate but stable. So far, the euro zone's economy has been less affected by the results of the Brexit referendum. The pound rallied against the US dollar, falling 0.45% in the session, falling below the 1.24 mark, the lowest to 1.2383, which was under pressure from the US dollar and technical selling. The Bank of England added new standards in the third round of open stress tests. Some of the UK's largest banks will barely pass, while other banks may be difficult to pass. The oil price rose by more than 2%, and the commodity currency strengthened. The US dollar against the Canadian dollar fell 0.80%, refreshing the daily low of 1.3400; the Australian dollar maintained its upward trend against the US dollar, is now reported at 0.7463.

Crude oil: On Monday, international oil prices bottomed out. US crude oil futures once closed a one-week low to $45.14/barrel in January, while Brent crude oil hit a low of $47.30/barrel in February, and then both rebounded slightly due to oil-producing countries. The divergence of production cuts is still large, the market continues to question the possibility of actual production cuts, dragging down the formation of oil prices, but the optimistic attitude of Iraq’s oil captain continues to provide support for oil prices, and more investors have chosen to wait and see due to the proximity to the OPEC meeting; From a technical perspective, oil prices still face a large downside risk. OPEC and non-OPEC oil producing countries were scheduled to meet on Monday, but canceled after Saudi refusal to participate. Khalidal-Falih, Saudi energy, industrial and mineral resources minister, said on Sunday (November 27) that the refusal to participate was due to the fact that OPEC has not yet reached an agreement. According to Falih, even if the oil-producing countries do not intervene, the oil market will be able to balance itself in 2017, so it is reasonable to maintain the status quo. According to the Saudi Middle East Daily, Saudi Energy Minister Falih said on the 27th that without OPEC intervention, crude oil demand will also recover in 2017, followed by the stability of oil prices; OPEC meeting is not only a reduction in production The road can go, the specific measures should be based on the recovery of crude oil consumption, especially the US crude oil demand. The Azerbaijani oil minister also said on Monday that canceling his trip to Vienna this week will not participate in this week's OPEC conference.

According to the Financial Times on Monday, Saudi Arabia offered to cut production by 4.5% from the production of 10.5 million barrels per day. This still leaves hope for a reduction in production. However, according to sources, Saudi Arabia proposed a 4.5% reduction in production in October; Saudi Arabia proposed that Iran should freeze production to 3.8 million barrels per day, and other member states will accept OPEC’s second-hand source production data, while Russia Oil countries must also participate; Iran said at the time that only countries that increased production in the past two years (such as Saudi Arabia) should cut production. The attitude of Iraq’s oil captain still provides support for oil prices, helping oil prices to rise more than 1% in the short-term, recovering all the declines during the day. Iraqi oil chief reiterated on Monday that he is optimistic about the agreement reached at the OPEC meeting this week. It is hoped that it will cooperate with all OPEC members to reach an agreement acceptable to all parties. On the whole, Saudi Arabia is not at a particularly positive attitude towards production cuts. Russia is more inclined to freeze production, while countries such as Iran, Iraq and Nigeria are hoping to obtain production cuts. US shale oil producers are still "looking". The possibility of oil countries reaching a frozen production is increasing, rather than the reduction in production that oil-producing countries have been advocating.

Morgan Stanley analysts said that at least a written overall agreement will be reached. If non-OPEC's strong support is expressed, the impact may be even greater. Future focus will shift to implementation risk, sustainability and production in non-OPEC countries. In response, if OPEC announces a considerable reduction in production, oil prices are expected to rise by $5 or more. JPMorgan Chase said that it is expected that the OPEC meeting will reach a 60% chance of successfully reaching an oil supply agreement. The failure of OPEC to reach an agreement will reignite the Middle East to compete for market share, which will cause oil prices to fall to the range of 35-40 US dollars / barrel.

Huitong.com believes that in the two-hour period, it will focus on the resistance near the middle of the Bollinger Band of US$46.98. If the mark cannot be effectively recovered, the risk of further downturn in oil prices will increase. The following focus is on the November 18 low of around US$44.55. Support for further support is located near the November 4 low of $43.57.

Stock market: European pan-European 300 index closed down 0.94% on Monday; UK FTSE 100 index closed down 0.7% on Monday; Germany DAX index closed down 1.2% on Monday; France CAC 40 index closed down 1% on Monday; Spain IBEX index closed on Monday It fell 0.6%.

Precious metals: On Monday, the US dollar index once closed a one-week low to around 100.63, and then recovered all the declines and rebounded to around 101.5, which caused the rebound in gold prices to be blocked. The current price of gold is trading at around $1187.54. The market generally expects the dollar to continue to rise. The rebound in gold prices is more supported by technical buying, but the holdings of gold ETFs continue to decrease, the rebound in gold prices is limited, and the downside risks remain large.

For gold, analysts have been heavily sold in the past few weeks, so technical buying and demand in Southeast Asia are very high. Buying on dips may push up short-term gold prices, but gold prices are still bearish given the large drop in gold ETF holdings. According to Huitong.com, gold ETF holdings are still continuing, which is not conducive to the mid-line trend of gold. The data shows that the world's largest gold exchange-traded fund (ETF) - SPDR Gold Trust last Friday (November 25) gold holdings fell 0.73% to 885.04 tons, for 11 consecutive trading days, the current position is also Five and a half months low. German commercial bank analyst Eugen Weinberg said that investors are still withdrawing from the gold market. Although gold fell below $1,200, causing some profit-taking, gold is dragged down by many factors, including the stock market, foreign exchange market and expected US interest rate hikes. Gold is a heavy burden. UBS analysts believe that the possibility of further decline in gold has not been ruled out, especially as ETF holdings continue to decrease.

[List of economic data]
1 US November Dallas Fed business activity index 10.20, expected value of 1.50, the former value of -1.50.

[Fundamental message list]
1 On Monday (November 28), the Iraqi oil captain reiterated his optimism about the agreement to reach a production cut this week, alleviating the worries caused by the comments of the Saudi energy minister last weekend. WTI crude oil main contract accelerated its rebound and turned to rise, refreshing day High 47.31 US dollars / barrel; some institutions expect this week OPEC has a 50-60% chance to reach a consensus on reducing production, and then push up the oil price more than 5 US dollars; on the contrary, oil prices are expected to fall below the 40 US dollar mark.

2 The Bank of England added a new standard in the third round of open stress tests. Some of the UK's largest banks will barely pass, while other banks may be difficult to pass. Autonomous Research LLP said in its report this month that seven large UK banks tested are likely to outperform the Bank of England's annual minimum standards. The test results will be announced on Wednesday. Autonomous said that stricter thresholds apply to banks that are considered to be of global systemic importance, and Royal Bank of Scotland and Barclays may have a "soft failure" in the standard. Assume the situation of China's recession, or the pressure test results of HSBC and Standard Chartered.

3 Sources said that Iraq is seeking to freeze production at 4.546 million barrels per day; Saudi Arabia insists on Iran's production limit; Iran is currently considering crude oil production; OPEC is considering issuing a statement that will summarize current concerns about production restrictions.

4 JPMorgan Chase said that since the FOMC November meeting minutes were announced, the US economic data is good; non-agricultural employment is expected to increase by 200,000 in November, and the interest rate hike in December should be almost finalized. Even so, the dollar trade-weighted exchange rate rose about 4% since the election, or raised concerns about the downside risks of the economy and inflation in the first half of 2017.

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