- It was a quiet start into the week as major currencies stabilised against the consolidating USD
- The USDJPY rally is running out of steam as investors wonder whether the dollar's sharp appreciation is overdone, on the downside, a support may be found at 110
- We believe that the dollar rally is coming to an end and that a retracement is more than likely, especially against JPY
- Crude oil unable to escape its declining channel as the prospect of a production cut deal amongst OPEC members is in doubt
- RUB may climb to 64,4 against USD spurred by OPEC meeting and the possibility of lifted sanctions due to Trump’s victory
- Stand ready for a crude oil and RUB sell-off, 66 RUB for a single dollar note represents our target for year-end
In the FX market, it was a quiet start into the week as major currencies stabilised against the US dollar. The greenback was trading mostly lower this morning as it consolidated the last two weeks’ gains. The Swedish krona stood out as the best performer during the Asian session as USD/SEK tumbled on the key 9.3309 resistance level. The currency pair failed to break the multi-year high from March 2009. USD/SEK retraced to 9.2370, down 0.70% compared to Friday’s close.
The Japanese yen continued its freefall against the USD as USD/JPY hit 111.19 in Tokyo. Japanese exports printed in negative territory for a 13th straight month in October, contracting 10.3%y/y and missing the median forecast of -8.5%. Imports were also weaker than expected as they contracted 16.5%y/y versus -16.1% consensus. All in all, the trade balance improved to ¥474.3bn from ¥358.5bn in September. However, the
Crude oil prices were better bid this morning amid broad dollar weakness. The West Texas Intermediate climbed to $46.35 a barrel in Tokyo, while its North Sea counterpart, the Brent crude, rose 1.05% to $47.40. The prospect of a production cut deal amongst OPEC members has had a limited effect as the market is now doubtful that the oil cartel will be able to reach an agreement at its meeting on November 30th. Therefore, crude oil has been unable to escape its declining channel and is now treading water at around $46 for the WTI and $47 for the Brent.
Yann Quelenn, market analyst: Russia: Ruble appreciates ahead of the OPEC meeting: "The ruble has started the week on a strong footing against the dollar, gaining almost 1% and heading towards 64.4 ruble. This rise is being spurred by hopes that a deal will be confirmed at this week’s OPEC meeting. Crude oil is also pushing higher, but in our view, no deal will be struck and we maintain our bearish view on the commodity.
Also, Trump's election is already offloading some downside pressure on the ruble because of the possibility of lifted sanctions. We are adjusting our views as we believe that global relations, in particular those between US and Russia, would have deteriorated in the event of a Clinton victory.
However, the ruble remains fragile due to OPEC member divergence. The only hope of an agreement, in the short-term, is pushing the currency to appreciate, which is why we believe that it is slightly overvalued right now. For the time being, we are pricing in a deal at about 70% (in view of past OPEC meetings) and are ready for a sell-off. The OPEC meeting may be seen as a disappointing trade: We therefore advise traders to be prepared for a sell-off in crude oil and ruble. 66 ruble for a single dollar note represents our target for year-end.” ---
Today traders will be watching total sight deposits from Switzerland; Chicago Fed Activity index and Fed member Fischer's speech from the US.