Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 08 December 2015 at 12:20 GMT

Mid-session Europe: Bottom of the oil barrel?

Saxo Markets


Foreign exchange


As Opec keeps pumping, the price of oil keeps slumping, and the net effect is disarray and lower prices across a swathe of markets and asset classes. At 1210 GMT, WTI crude, the US benchmark, is trading at $37.90/barrel while Brent crude, its European equivalent, is at $41.30/b.But though prices have recovered a shade over the past few hours they are still hovering near multi-year lows.

Other casualties of the precipitous fall in the price of a barrel of oil include the currencies of countries especially dependent on it, including the Canadian dollar and the Norwegian krone. At 1211 GMT, CADUSD is down 0.33% from yesterday's US close to 0.7381, while NOKUSD has shed 0.60% to 0.114742.

Global equities, too, are suffering. In Europe, the FTSE and the Dax are following Asia's weak lead and 0.85% and 1.15% in the red respectively. Further east, the Financial Times reports that Saudi shares, as represented by the Tadawul all-share index, are 2.5% behind.

But though severe, and very damaging, this oil retreat isn't endless. As Ole Hansen, Saxo's head of commodity strategy, tweeted earlier today: "Demand for oil from China and US motorists, combined with slowing US production will eventually stop the oil rout." 

Elsewhere, data releases so far today, include:

  • Japan Final Q3 GDP revised up 0.3% QoQ and +1.0% YoY.
  • China trade data disappointed setting the risk off mood in European equities.
  • UK Oct Industrial Production: 0.1% MoM as expected and 1.7% vs.12% YoY.
  • UK Oct Manufacturing Production: -0.4% vs. -0.2% m/m; -0.1% vs. 0.% y/y.
  • Eurozone Q3 GDP in line with expectations 0.3% q/q and 1.6% y/y.

Data to come (all times GMT)

  • Canada: Nov Housing Starts (1315)
  • US:        JOLTS Jobs Openings Oct. (1500)
  • China:    Nov CPY (0130)


  • Canada BoC Poloz to speak (1810) 

Forex developments

EURUSD: started off in Europe with a rally and risk-off as exchanges opened, where main European indices opened down and reached 1.0882 area. 1.0900 and 1.0890 area are levels to watch in this range we are in. Reason being the psychological level and also the 1.0895 is a Fibo level from the drop from October 15 to lows of early December and has been respected twice both today and yesterday. The longer we stay below 1.09 the more it looks like we will range in 1.08 to 1.09 going into FOMC, so need to see breakouts soon. Remember the topside is very clustered with major moving averages 1.0980 to 1.1060 area. 

USDJPY: continues in the boring range we have spoken of 123.50 to 122.90. The main support is 122.5, which needs to be watched if broken under more risk off. We're still watching the breakouts of 123.75 or 122.25 area for new direction.

GBP: we were looking at the range 1.5115 to 1.5050 yesterday and were slightly lower but closed at 1.5054 area. The range broken today and targeting again new lows below 1.4990 area. Lower house prices for November in UK starting the selloff, which should add a negative tone on GBP in general going into Bandk of England meeting on Thursday. EURGBP the action of the start of this week and UK housing figures giving sight of the 0.7300. Supports at the 0.7200 area, where there also is a cluster of main moving averages.

Commodity currencies: USDCAD – We are above 1.3500 and closed yesterday a whisker below 1.3500 but the momentum looks for further weakness. The close above 1.3455 area confirmed the close above the highs of September 29, and now this acts as the support area. As we mentioned in Asian update, there are no short term resistances above these levels. A Fibonacci from lows of October 15 to today’s highs shows 1.400 as the next level, this would be more of a long term level. 

NOK looks weak, and oil not helping either, EURNOK 9.500 in sight and maybe above, especially growing belief in a Norges Bank surprise on December 17 which could eventually break the highs of 9.6268 from September 29.

FX Options volatilities

A large drop in oil yesterday has put pressure on commodity currencies and gamma has been well bid in pairs like NOK, CAD and AUD. Thursday we have Reserve Bank of New Zealand, which today is trading ard 27 vols and should tomorrow come in at ard 40 vols as overnight expiry. EURUSD vols trading a bit softer, with 1month EURUSD at 9.85 down 0.1 for the day. GBPUSD vols a bit up, with 1-month up 0.1 after weaker than expected UK manufacturing prod.

Fixed income

Bunds' rally runs out of steam at 158.40 level equal to 0.59% 10-year yield, while XOVER climbs to just below the 300 bps. Anglo American bonds under pressure after dividend suspension. Russian bonds little softer but holding steady despite oil pressure, sovereign CDS at 292 bps.




European equities gave back a lot of yesterday’s gains as most of the major bourses slipped between 0.6 and 0.8%, as once again commodity markets weighed on the indices.

WTI crude oil now trading below $38/b and iron below $40 meant that the oil and gas sector and the miners lead the declines in the Stoxx 600.

Also adding to the decline was weak Chinese trade data that underscored the global demand slump that’s lead the energy and metal markets to multi-year lows.

Anglo American announced a halt to their dividend this morning as the shares fell 9%. Meanwhile in France, Orange were reportedly in early talks about buying Bouygues telecommunications; Orange were trading up 0.5% on the day and Bouygues were up 1.7%.


Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

Read More

US:        US Market Wrap: Markets roil on oil turmoil

Asia:      Morning Report APAC:  Six-year crude low hits commodity currencies

oil  Opec keeps pumping, prices keep slumping and we're running out of space to store it. Pic: iStock

— Edited by Clare MacCarthy

The Global sales Trading desk is a multi-asset team providing customised trading solutions

tradingwithapro tradingwithapro
This comment has been redacted


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail