Movements on commodities amid an otherwise still market
With markets closed in most of Europe on Monday, the market has remained tight and directionless.
The most important event occurred over the weekend. Finally, the member countries of OPEC + and other Oil producers belonging to the G20 agreed on a cut in Crude Oil production of 9.8 M barrels per day.
The positive thing about this news is that finally, the two big producers, Russia and Saudi Arabia, put an end to the confrontation that caused the collapse of the price of Crude.
The negative is that the cut has not met market expectations and falls short to stop the price decline. Demand for Crude Oil and derivatives has fallen 60% compared to pre-crisis data, and the inevitable economic slowdown that is taking place in the global economy and that will continue for an indefinite period will continue to be insufficient to support the current price.
To all this, we must add the uncertainty about how long this agreement will be maintained, for the moment they have committed to two months. This short period will need new negotiations for an extension, and that will presumably raise new disputes between producers.
BrentOil rose slightly with the announcement, just above $33, and then continued to be sold. Most oil analysts agree that the measure will not stop further declines; at best, it can only slow down these declines, and if full use of storage capacity occurs, Crude could return to collapse.
In the short term, BrentOil has resistance in the zone between $32.20 and $32.50, and the support is at the minimum reached at $ 30.67.
The Canadian Dollar
With a potential drop in the price of Crude Oil, one of the significant currencies most affected would be the Canadian Dollar.
The Canadian economy is being hit by the crisis, a situation that would be aggravated by Crude at low prices. The latest employment data reflects the severity of the condition with more than 6M workers seeking unemployment benefits, a figure that will inevitably increase in the coming months. The Central Bank of Canada meets this week - it already has little room for maneuver to cut interest rates and has already started a stimulus program to buy bonds. The statement after the meeting will be interesting for the market since it will reveal a negative assessment for the economy, and some additional expansionary measures cannot be ruled out, say market voices. All of this puts the Canadian currency in a vulnerable position.
The CAD/JPY pair opened lower on Monday and found resistance in the zone between 77.50-77.70.
GOLD managed to break the highs of early March at $1703 an ounce amid strong buying momentum. Now the next resistance level is at the 2012 high at $1,793 an ounce. To the arguments explained in previous comments (depreciation of the currency due to the increase in the money supply), one must add a shortage in the production of bullion from the main refineries due to the epidemic.
This has led to arbitrages between the spot and futures prices due to the fear that future contracts may not be deliverable. At the moment, the conditions for the rally to continue, remain unchanged.
This week will be important for the market as the earnings season begins. This quarter and the next will show results of the big companies never seen before. The results previously estimated are not valid, so the market lacks references.
Corporates may be inclined to show higher losses now that government stimulus measures have been implemented in the hope of a recovery in the coming periods.
The stock market begins to anticipate bad results on Monday with slight falls that can be accentuated if the lousy forecast is fulfilled. The effect would not only be visible in stocks, but in the currency market as well, the Dollar would also be negatively affected according to the general sentiment of the market, say market analysts.
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