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The oil market has a habit of looking settled right before it stops being settled. That is the setup now.
Traffic through the Strait of Hormuz has dropped sharply as the conflict around Iran has intensified, and more vessels are going dark by switching off AIS, or Automatic Identification System, signals that usually show where ships are moving. Hormuz is not just another shipping lane. It is one of the world’s most important energy chokepoints, so when visibility starts to disappear, supply risk moves back to the centre of the conversation.
Why this matters now
This matters for a couple of reasons.
The headline move is one thing. The market implication is another. Oil is not only about how many barrels exist, rather, it is also about whether those barrels can move, who is willing to insure them, how long buyers are prepared to wait and how much extra risk traders feel they need to price in.
Right now, three things are colliding at once: disrupted shipping, fragile diplomacy and a market that is already leaning heavily in one direction. That combination can make Brent move faster than the fundamentals alone would normally suggest.
What is driving the move
1 Supply visibility is deteriorating
The first driver is simple. The market can see less, and that tends to make it more nervous.
Transit through Hormuz has fallen sharply, while a growing share of traffic has involved ships that are no longer broadcasting standard tracking signals. In plain English, fewer vessels are moving normally through a critical corridor, and more of the activity is becoming harder to track. That does not automatically mean supply is about to collapse. But it does mean uncertainty is rising.
2 Iran’s storage buffer may be limited
The second driver is Iran’s export and storage constraint.
Onshore storage capacity is estimated at about 40 million barrels, and the market is watching what some describe as a 16-day red line. That is the point at which a prolonged export disruption could begin forcing production cuts to avoid damage to reservoirs. For newer readers, the takeaway is straightforward. If oil cannot leave storage for long enough, the problem may stop being about delayed exports and start becoming a genuine supply issue.
3 Positioning could amplify the move
The third driver is positioning, which is just market shorthand for how traders are already set up before the next move happens.
In this case, speculative crude positioning looks heavily one-sided. That matters because when a market is leaning too far in one direction, it does not take much to trigger a sharp adjustment. A fresh geopolitical shock could force traders to move quickly, and once that starts, price can run harder than the underlying news alone might justify.
Why the market cares
An oil shock rarely stays contained inside the energy market.
Higher crude prices can start showing up in freight, manufacturing and household energy bills. That means inflation expectations can start creeping higher again. Central banks are already trying to manage a difficult balance between sticky inflation and softer growth, so higher oil can make that job harder.
And this is not just a story about oil producers getting a lift. Airlines, transport companies and other fuel-sensitive businesses can come under pressure quickly when energy costs rise. Broader equity markets may also have to rethink the policy outlook if higher oil keeps inflation firmer than expected.
The ripple effects go well beyond oil
There is also a currency angle, and it is less straightforward than it first appears.
Commodity-linked currencies such as the Australian dollar often get support when raw material prices rise. But that relationship is not automatic. If oil is climbing because global demand is improving, that can help. If it is climbing because geopolitical risk is spiking, markets can shift into risk-off mode instead, and that can weigh on the Australian dollar even as commodity prices rise.
That is what makes this kind of move more interesting than it looks at first glance. The same oil rally can support one part of the market while putting pressure on another.
Assets and names in the frame
Brent crude remains the clearest read on broad supply risk. If traders want the cleanest expression of the headline story, this is usually where they look first.
- ExxonMobil is one of the more obvious names in the frame. Higher oil prices can support realised selling prices and near-term earnings momentum, although it is never as simple as oil up, stock up. Costs, production mix and broader sentiment still matter.
- NextEra Energy adds another layer. This story is not only about fossil fuels. When energy security becomes a bigger concern, the case for domestic power resilience, grid investment and alternative generation can strengthen as well.
- AUD/USD is another market worth watching. Australia is closely tied to commodity cycles, so stronger raw material prices can sometimes support the currency. But if markets are reacting more to fear than growth, that usual tailwind may not hold.
For newer readers, the key point is that oil moves do not spread through markets in a neat, predictable line. They ripple outward unevenly, helping some assets, pressuring others and sometimes doing both at the same time.
What could go wrong
A strong narrative is not the same as a one-way trade.
A ceasefire could stabilise shipping flows faster than expected. OPEC+ could offset some of the tightness by lifting production. Demand data from China could disappoint, shifting the focus back to weak consumption rather than constrained supply. And if the geopolitical premium fades, oil could pull back more quickly than the current mood suggests.
For newer readers, the takeaway is simple. Oil rallies can be real without being permanent. A move may be justified in the short term by disruption risk, then reverse quickly if those risks ease or if demand softens.
The market is no longer pricing oil in isolation. It is pricing visibility, transport security and the risk that supply disruption spills into inflation, currencies and broader risk sentiment.
That is why Hormuz matters, even for readers who never trade a barrel of crude themselves.
Friday 7 th July 2017 saw the official start of the two-day G20 summit in Hamburg, Germany, were delegates from 19 countries come together to discuss matters ranging from free trade to Global warming. We have compiled this quick guide to what you can expect from the markets after this year’s summit. What is G20?
The G20 started in 1999 as a meeting of Finance Ministers and Central Bank Governors in the aftermath of the Asian financial crisis. In 2008, the first G20 Leaders’ Summit was held, the main issue discussed was in responding to the global financial crisis. The decisive and coordinated actions boosted consumer and business confidence and supported the first stages of economic recovery.
Who is a member of the G20? The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States and the European Union. The group represents around two thirds of the world's population, and 80% of the world's trade and economic activity.
The G20 is two days of formal meetings, preceded by informal meet-ups. Since last year’s meeting in China, over a quarter of the countries are under new leadership; Donald Trump (USA), Theresa May (UK), Michel Temer (Brazil), Paolo Gentiloni (Italy), Moon Jae-in (South Korea), and Emmanuel Macron (France). What should you expect from the markets?
According to research in 2014 by ECB (European Central Bank) concluded "The big picture arising from our analysis is that effects of G20 summits are small, short-lived, non-systematic and non-robust." Although, they did emphasize they weren’t able to measure the long term impact associated with policy makers becoming familiar with each other and long term trade deals negotiated once the summits had ended. I think it’s vital to add that this study was completed before the era of President Trump. No leader in recent years has so avidly professed his disdain for the current frame work of world trade, believing that the rest of the world is benefiting from America’s weakly negotiated trade deals.
His protectionist views, meaning protecting domestic industry from global competition, would benefit the US economy in the long term if enacted. How will “America First” resonate with the twenty other leaders? It’s impossible to predict, but any statement or plan advancing his wish-listed views would see a global market reaction.
By: Samuel Hertz GO Markets
Since September last year, the British Pound has enjoyed a relatively easy time against the Australian Dollar, often described as a solid bull run. However, many fundamental drivers have turned sour for the Sterling crosses, and with GBPAUD in particular, we may be in for a significant price reversal. What's Driving the Pound Aussie Pairing?
The obvious elephant in the room would be Brexit. For a while, it seemed there might have been light at the end of the tunnel for the UK and the EU, hence the bull run. However just recently, UK Trade Secretary Liam Fox has predicted that the odds of a ‘no deal’ are now as high as 60-40 due to difficulties, and subsequently, the general sense of doom and gloom weighing on the UK economy has reared its ugly head once more.
Australian Dollar Not Resistant To A Few Headaches On the flip side, conditions aren't necessarily much better south of the equator. As a commodity-centric currency, the Australian Dollar is struggling while trade-war-like tensions brew between the US and China. If we add jitters in Turkey creating a sell-off in higher risk currencies, as well as the RBA’s more cautious tone on inflation, the overall picture for AUD appears just as bleak as the Pound Sterling.
Since we've established both currencies have their potholes on the road ahead, let's push the fundamentals aside and discover a potential trading opportunity from a technical perspective which appears to be gaining traction. GBPAUD - Daily Starting with the daily chart above, notice the price action is trading considerably below the 200 day moving average line in gold. It indicates an overall bearish trend so long as the prices continue to close below 1.7657.
A Potential 1000 Pip Move? Well not quite. Based on the latest technical analysis, the formation of a head and shoulders reversal pattern is developing, and should it follow through, we would be looking at a downside target of approximately 965 pips.
How was this estimation reached? Let me explain. Below the chart highlights the developing Head and Shoulders reversal pattern.
Next we draw the neckline in blue. We then measure the distance between the neckline and the top of the head formation and record this figure. Once the price closes below the neckline closest to the right shoulder, we minus the length of this distance to the levels below creating a price target.
In this case, we see a target price of 1.6265 or (1.7230 - 965 = 1.6265). What I find most interesting with this potential price target (1.6265) is the fact that the 1.62 regions have been known to be a substantial area of support back in September last year when the latest bull run first began to emerge. It's almost as if the pair is attempting to return full circle should this move come to fruition.
With both domestic economies currently under fire, it will be tough to know which of these currencies will win the battle and come out on top. If Brexit negotiations are as much of a mess as we're lead to believe in the media, it's only logical that the Pound will haemorrhage across the board and we could see some severe moves such as this. However, given the level of risk out there in the markets at this stage, we could just as quickly see the Australian Dollar lose its footing and tumble down.
By Adam Taylor CFTe This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk.
Sources: Tradingview, Bloomberg
The FOMC Meeting is set to be the highlight of the week as it might revive the rising trend of the US dollar. Watchful eyes are glued to the reactions of the financial markets as the new tariffs officially take effect today. The policy divergence between the Fed and other central banks have put the US dollar in the spotlight and traders are keen to see how the Fed will play a probable fourth rate hike in December.
EURUSD Fundamental Analysis The EURUSD pair mainly found support by a weak US dollar last week. As we progressed into a new week, the Germany IFO Business Climate and EX CPI figures will be the main events on the data front for the Euro. Core inflation is expected to remain the same while elevated energy prices should drive headline inflation slightly higher at 2.1%.
On the political front, attention will be on the Italian Budget. Technical Analysis The pair has formed an ascending triangle and the breakout through the resistance level might be the signal of a bullish formation. The uptrend line shows that sellers are losing control and bulls are pushing the pair higher.
It is currently trading around the 1.1740 level, and a firm confirmation above that level could provide bulls with trading opportunities. GBPUSD Fundamental Analysis After the renewed confidence over positive Brexit news, the Sterling is trading on the back foot again. A lack of economic releases on the UK-calendar will cause the pair to be mostly driven by Brexit related news.
Technical Analysis After falling out of the overbought RSI conditions, the Gravestone Doji candle which formed on the weekly chart in an uptrend pattern shows that the selling pressures were able to push prices back down to the opening price of the week. This can signal that the uptrend could be over and long positions should trade cautiously. However, Friday’s sell-off might also be panic-selling so bears should wait and see for a clear down direction to act.
AUDUSD Fundamental Analysis This pair remains vulnerable to the US-Sino trade war. A lack of macroeconomic data during the week with only some releases on Friday will likely stay driven by trade angst. Technical Analysis On the technical side, the pair remains trapped in a bearish channel.
The pair has stayed dampened in since the beginning of the February 2018.
First Quarter Overview - Massive Swings and Volatility in Stock Markets First quarter of the year ended with markets experiencing massive swings and volatility. Higher bond yields, revised inflation expectations and a potential trade war brought fears to the markets, making investors very sensitive to any economic data releases or changes in the markets. Markets were comfortable to the “artificial” low interest rates for a decade.
Higher bond yields rattled the markets as investors realized that the “ era of low interest rates which was created artificially by quantitative easing” is coming to an end. After the financial crisis in 2008, major central banks across the world cut their base lending rates. The below graph depicts the dramatic change in interest rates after the crisis.
With a stronger global economy, central banks have started unwinding the post-GFC monetary stimulus and policymakers are ready to change their stance on interest rates which are putting pressure on the bond markets Traders are in a fragile state of mind as higher interest rates mean that safer bonds are offering greater returns, making risky stocks less attractive. After February’s tumble, stock markets’ volatility soared on the aggressive tariffs stance taken by President Trump. A potential trade war between China and U.S, the world’s two largest economies, are threatening the spectrum of global trade.
Even though President Trump is confident that “trade wars are good and easy to win”, it seems that he is forgetting that history is telling a different story. Markets are swinging between risk off and risk on mode following any tit-for-tat response from the US and China. At the Boao Forum, President Xi’s speech managed to ease some concerns, but investors stay worried as the unpredictability and uncertainty around global trade could put considerable pressure on the markets.
Federal Budget 2018: A Mixed Reaction By Deepta Bolaky Treasurer Scott Morrison handed down his third incorporating tax cuts, superannuation benefits, aged care spending and significant infrastructure spending. The highlight is its plan to hand out $140 billion in tax cuts over the next 7 years possibly making the budget a strong “pre-election” one. It also focused on providing immediate tax relief to the low and middle-income earners by proposing an “offset at the end of the year” effective from 01 July 2018.
The government plans to partly compensate for the loss in revenue from the income tax cuts by taxing illicit tobacco and putting a $10,000 cap on cash payments in an attempt to crackdown on the black economy. The Australian economy entered its 27 th consecutive year of growth and bringing back a budget surplus within the next 2 years appears to be a realistic expectation according to the government. It is also expected that by 2028-29 net debt will decline to 3.8 per cent of GDP.
Source: Business Insider Reactions from the markets so far... Whilst most sectors saw positives out of the proposed measure and policies, it was hard to see the same reaction from the financial sector which makes up almost 30 per cent of the S&P/ASX200 (by market capitalization) after the announcement of a new (proposed) tax on bank liabilities. Consumer discretionary and Consumer staples were mostly positive as tax cuts are expected to boost consumer confidence and spending, seen as favorable for underlying stocks.
Infrastructure and Healthcare also got a lift following the proposed spending plans and policies. No exit fees, a cap on annual fees for superannuation and an overhaul for R&D refunds were understandably drivers of a sell-off in Biotech and Superannuation stocks. Source: Bloomberg The positive sustained reaction from Bond markets is expected to last as the early balance surplus is a quite a crucial factor to consider since it will give support to the country’s AAA credit rating.
The initial impact on the Australian Dollar remains mixed so far. However, it is worth keeping an eye to see how the Budget will unfold over the coming weeks and months.
French elections 2017 With Brexit in full swing, Europe is getting ready for another political event and the people of France are going to decide on who will run their country next. There are four main candidates for the job – Benoit Hamon, Emmanuel Macron, Francois Fillon and Marine Le Pen. Each of the candidates has his/her own views of how France should be moving forward and it will unquestionably have an impact on Europe’s third largest economy.
The candidates Francois Fillon, The Republicans Francois Fillon is the member of The Republicans party and only a few months ago was predicted to win the election. Fillon was previously the prime minister of France from 2007 until 2012. He won his party’s primary last year by 15 points beating the former President – Nicolas Sarkozy.
His plans include scraping the 35-hour working week, removing the wealth tax and cutting half a million public sector jobs. Marine Le Pen, National Front Marine Le Pen is one of the front-runners in this year’s elections, she is the leader of the far-right National Front Party. Le Pen took place in the 2012 presidential election and placed this behind Nicolas Sarkozy and Francois Hollande with 17.90% of the vote.
Her plans include reducing immigration and raising welfare benefits, but her biggest plan is to hold a referendum on the country’s European Union membership and taking them out of the Eurozone. Emmanuel Macron, En Marche Emmanuel Macron is one of the youngest candidates for the presidency and at 39 he has already served as economy minister. He has since started his En Marche movement.
His plans include – greater checks on politician’s powers and has backed deregulation in certain French industries. He also plans to end 35-hour week for younger workers. Benoit Hamon, Socialist Party Benoit Hamon is a member of Socialist Party and the Party of European Socialists.
He became the presidential candidate on January 29 th, 2017 after defeating Manuel Valls in the second round of the party primary. His plans include taxing wealth created by robots and to have a universal monthly payment for French citizens, regardless of their income. What are the polls saying?
Latest poll from Harris Interactive shows Emmanuel Macron (26% of the vote) currently ahead of Marine Le Pen (25% of the vote) for the first round of France’s presidential election. The former front runner Francois Fillon is behind with 20% of the vote and Benoit Hamon in fourth with 13%. Source: Harris Interactive poll Your Watchlist We have seen a steady decline in the EUR over the last few months.
Europe is now facing another political headache and more uncertainty when the French elections take place this year. The two frontrunners – Emmanuel Macron and Marine Le Pen are very close in the polls and have different plans for France. Regardless of who wins the French elections, the EUR will certainly be tested and one to watch.
EURUSD Source:GO Markets MT4 On the Indices front, the CAC40 index has been on the rise in the recent months as you can see in the chart below. The index may not be showing signs of pessimism for the time being. We see a similar pattern on the Euro Stoxx 50.
Will we see a different picture closer to the election and how will the result impact the index? We will find out in the coming months. CAC40 Source: GO Markets MT4 STOXX50 Source: GO Markets MT4 Key dates for the French Presidential election > The first round of the vote will take place on Sunday April 23, 2017. > The two candidates with the most support will go into head-to-head final vote, which will be held on May 7, 2017.
By Klavs Valters, GO Markets