Dollar Affects Oil Importers And Exporters Differently

As we know the Brent crude oil futures are priced in U.S. Dollars (USD). The increase in value of the USD against other currencies and the recent decline in USD crude oil prices has logically different effects on oil importers and exporters as the EIA (U.S. Energy Information Administration) points out:

For example, the price of Brent crude since July 1, 2014, declined by 56% through January 21 in USD. However, given the depreciation of the Indian rupee and Turkish lira against the U.S. dollar over the same period, Brent crude prices in terms of those currencies fell by only 55% and 52%, respectively. Turkish and Indian consumers are therefore experiencing a lesser decline in the cost of imported oil products than consumers in countries that use USD or currencies with lesser or no depreciation against the USD.

On the other hand when Canada or Norway, both net oil exporters, convert their oil sales revenue from USD to their currencies the price of Brent crude in Canadian dollars or Norwegian kroner has fallen only 49% and 46%, since July.

Here is the post from EIA with more details.

EUR/USD (6E) TWAP Market Update

All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.

Here is a quick top down TWAP perspective on the currency pair EUR vs USD. Firstly let's take a look into our Trading Glossary about TWAP:

Twap is an abbreviation for the Time Weighted Average Price. This is just like VWAP only it is weighted upon time. This is also an order type that many institutional investors utilize to work in and out of significant positions. It behaves like an Iceberg order by only showing a certain amount of orders to be executed but continues to refresh the orders throughout the session until the position is complete.

With this informaiton in our mind let's going through the monthly, weekly and intra-day TWAPs. Make sure to have time based charts as this is a Time based tool. However, this is our logical preference but you can playing around with whatever other chart formats as well. The Forex market is a 24 hours market, so there is no point in using a 'London Session', 'U.S. Session' or name them all. With that said, all charts here are ETH/Globex based and representing the march futures contract (6E). Like always it is your free choice in which way you will use this tool.

As usual, we beginning with the monthly TWAP. Looking at this installed tool, we can see a cleary selling imbalance with the developing value slope to the downward. The market opened below the previous month's value close area and since that point it rejects the developing value low. In summary a very bearish rated view here.

Moving forward to the weekly TWAP, we can observe an open below the previous week's value close area with a developing value slope to the upward. Additionally the market is trading in a balanced behavior, so a break above should lead us to the previous week's VAL close level but we should be very careful to take any long trades with the bearish HTF macro perspective, especially with the strong US Dollar index. Anyway, everything can happen and we should have an open mind for potential changes in the market context.

Now looking at the intra-day VWAP, we can see an open below Friday's value close area and a developing value slope to the upward. Currently we got back into the previous value area and trading above the developing value. Test of the previous TWAP close level as well as a rotational move back to the developing value low are possible scenarios. We'll see what will happen here.

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USD vs CNH Technical Analysis

All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.

Here's a quick technical perspective what we are seeing with the USD/CNH currently. As usual, we will walk through our top down process looking for the path of least resistance and market context.

To start out, let's take a look at where we are from a pure Monthly bars and Weekly bars perspective to view the macro context. We can see that the market formed a balance area in the previous months. Actually the market broke out to the upside and trading above that balance area now. With the installed Fibonacci levels we can see that the market found support at the 50% and the 61.8% level to form the bracket area. Currently the market testing a potential resistance area but could heading toward to the next marked area in the new year.

With looking at weekly bars chart, we can identify a one time framing higher market that occurs since several weeks. Also the previous week's high got taken out from the current one. However, we can observe a rejection area with the previous bracket low that holds since two weeks.

With installed EMAs on this weekly timeframe we can see that a bullish short-term trend is intact currently.

Moving forward to the daily perspective we can identify some brackets and gaps. With yesterday's close and today's open the market actually broke this current balance area. As we know gaps are potential areas that could be revisit. The market opened and moved lower to revisit and fill that open gap. There is also one more potential gap lower to target. With today's close within the bracket a test of the balance area low is somewhat probable.

It looks like the stream of buying died up here and some guys took profit today. This could lead to more short selling to revisit the next gap. With a close below 6.2135 the likelihood to explore lower prices would be higher. Anyway, everything can happen. Let's stay focused and react to market generated informations.

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