HYCM Market Insights & Trading Tips

Market Mood AUDJPY 04.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the AUDJPY pair on Youtube.



Weak AUD, Strong JPY

Risk sentiment is negative this morning as the Asia-Pacific stocks take their lead from the downbeat picture in US stocks which saw the Nasdaq lose 5% and the Dow Jones lose 2.78%. This negative sentiment should keep the AUDJPY pressured on the session. The AUD as a high beta currency tends to lose value in a risk-off market. Similarly, the JPY as a safe haven tends to gain value in a risk-off market. This means that investors and traders will expect any AUDJPY rallies to find sellers.
However, the market is starting to consolidate before the US jobs data in the US session, so that is a risk factor for this trade outlook. A strong jobs number will invalidate this outlook. However, a weak print will confirm the risk-off bias.

Expect sellers on the AUDJPY on rallies higher.

Trade Risks:

1. A better than expected jobs number above 2.3 million.
2. Any positive news that changes the current negative risk tone.

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How to use the Dollar Index in your trading
by Giles Coghlan, Chief Currency Analyst at HYCM

The USD is the currency that all others revolve around. Understanding that is a key concept to grasp early on in your trading experience. The moves in the major pairs over the last few weeks have mainly been dollar-driven. Specifically, it has been a weaker dollar on the huge stimulus measures out of the US and the virtually unlimited QE programme. All this has resulted in the present dollar weakness which has been driving the major pairs higher. So, here are a couple of practical applications to take away and apply to your trading.

Firstly, when you are trading major pairs, always look at the US dollar Index. The overall USD strength or weakness will help show you the near term expected direction in the major pairs. Here is a setup below that you can use. The Dollar Index is in the bottom right of the charts and all the majors are visible at a glance. It is helpful to lay out the major pairs alongside the Dollar Index like this:


Secondly, whenever you are trading the EURUSD remember that the DXY and EURUSD always move in the opposite direction. DXY up, EURUSD down. EURUSD up, DXY down. This is why the Dollar Index is also known as the ‘anti-EURUSD index’. (check out the below chart – DXY orange line, the candlestick chart is the EURUSD). So, this means that you never want to be trading the EURUSD higher if the DXY is moving higher and vice versa.


Grasping the USD focus of the FX world is extremely important to understand. You can use this lesson to improve your handling of the major pairs and in particular the EURUSD pair.

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FX Week Ahead 07.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

This week saw a divergence remain in place between the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ). The RBA kept interest rates unchanged midweek but extended its term funding facility that allows banks to access low-interest money flows for small and medium-sized businesses. The recent communication from the RBA does not suggest a rate cut is due. However, in contrast, the RBNZ maintained its position this week to implement negative interest rates next year. Can this central bank divergence support AUDNZD dip buyers in the coming week?

Key events from the past week

1. AUD: RBA holds rates, Sep 01. The RBA left both the cash rate unchanged at 0.25% and the 3yr yield target at 25bps as expected. Inflation is expected to average between 1 and 1 1/2% over the next couple of years. All in all, there were very few surprises here as the bank held a steady course.
2. NZD: RBNZ committed to negative rates, Sep 02. RBNZ’s Governor Orr is committed to the possibility of using negative rates. The central bank has indicated it could take the cash rate negative next year. This means the divergence between the RBA and the RBNZ remains open for now.
3. AUD: Oz’s golden run ends, Sep 02. Australia’s GDP data showed a fall by -7% in Q2 from a -0.3% decline in Q1. This has brought a solid run of 28 years of economic growth for Australia to an abrupt end. Furthermore, the shutdowns in Victoria State are expected to weigh heavily on Q3 GDP data too.

Key events for the coming week

1. CAD: BOC rate decision, Sep 09. Overnight Index swap prices over the next 12 months suggest lower rates are more likely than higher rates. However, there is a 91% probability of no rate change, so any surprise rate cuts next week will quickly weaken the CAD in a short sharp move lower.
2. EUR: ECB rate decision, Sep10. The ECB may feel pressured to add more stimulus after the recent run of strength in the EURUSD. Rates are expected to remain unchanged, but EUR traders will be ready for the potential volatility out of the rate meeting and the press conference 45 minutes later at 13:30 BST.
3. Copper: Pull back for Copper? September. Copper is now pulling back from its recent two-year highs as the USD found strength. A stronger USD tends to weaken copper prices as the metal costs more for purchasers using the non-US dollar-denominated currency.

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Market Mood HG1! 07.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the HG1! on Youtube.


Copper’s prices have been underpinned by a number of factors even as equity markets tumble. China has been boosting infrastructure spending after the fall out from COVID-19 which has been helping copper demand. There has been a sharp drawdown in stockpiles in LME tracked sheds and copper holdings have collapsed to lowest since 2005. Looking at outstanding orders to remove metal they haven’t bottomed yet. The USD has been weak and that helps boost commodity prices including copper. Supply concerns are lingering especially in top producer Chile.

If this environment remains then expect copper buyers on pullback and breakout.

Trade Risks:

1. A fast return to supply from Chile.
2. A rapid fall in copper demand across the world.

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So how about a ‘K’ shaped recovery?
by Giles Coghlan, Chief Currency Analyst at HYCM

Bloomberg had an informative post-mid-week that replaced the idea of the dialogue between a ‘V’ or ‘U’ shaped recovery with the idea of a ‘K’ shaped recovery. The piece was highlighting that there is a two-tier recovery going on at the moment. This ‘two pathway’ road to recovery has a higher rate of recovery for the richer nations than the poorer ones. A Bloomberg study found that the stocks and currencies from wealthier nations are actually outperforming poorer emerging market peers as nations attempt to cope with COVID-19. It is a classic example of the ‘haves’ vs the ‘have nots’ in the global economy.

A Bloomberg study made up of 17 emerging markets found that there was a correlation of 42% between GDP per capita and stock performance since the risk sell-off began in January of this year. The study found that the correlation between GDP per capita and currency returns was 31%. In simple terms, the wealthier nations are recovering at a quicker pace than the less wealthy nations.

Take a look at this Bloomberg chart below as this illustrates the point visually:


Furthermore, the rich and poor divide was found to be most pronounced in Asia. The stock returns from the four economies per capita GDP above $10000 last year (China, S.Korea, Taiwan, and Malaysia) are 20% above that of other nations that fall below that level including India, Indonesia. The Philippines, and Thailand. Part of the reason for this divergence is also due to the presence of more tech companies in the first list of countries. However, it has also been down to other factors. Such as the fact that more affluent countries have had the benefit of being able to use advanced technologies, have strong governance, and can access a wider range of policy options to cope with the crisis.

Will this mean that the most developed nations will witness buying on the dips on any stock falls?



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Market Mood AUDNZD 08.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the AUDNZD pair on Youtube.



Strong AUD, Weak NZD

The divergence between the RBA and the RBNZ remains in place supporting the AUDNZD.

The RBA is looking to keep interest rates on hold as per their last central bank meeting and the next move from their 0.25% base rate is expected to be up. Now, although rates are expected to remain on hold for some time, this is the lowest the RBA is expecting them to go for now.

The RBNZ by contrast is expecting interest rates to turn negative from the current 0.25% base rate and is actively preparing for that situation. The pressure on NZD 10 Y bond yields is evidence that bond markets have been pricing in a move to negative rates.

This means that the current pullback in the AUDNZD should find buyers at the market. Expect profit takers at the overhead resistance level marked on the daily chart.

A serious breakdown in US-China trade relationships hurts the AUD more than the NZD and would invalidate this outlook.

Trade Risks:

1. A deterioration in Australia’s economy.
2. A pick up on New Zealand’s economy.

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Is Copper set to gain over the medium term?
by Giles Coghlan, Chief Currency Analyst at HYCM

Copper’s prices have been underpinned by a number of factors recently even as equity markets have tumbled into the end of last week. Below are some of the factors that have been encouraging copper buyers over the last few weeks:

1. The first reason has been the weakness in the Dollar Index. The USD has been weak on large levels of Fed stimulus and virtually unlimited QE. This weak dollar helps boost commodity prices including copper.
2. There are general supply concerns from the top Copper producer Chile. As long as supply is restricted from South America this helps support copper prices.
3. There has also been a pronounced drop in copper stockpiles as noted in London Metal Exchange tracked sheds and copper holdings have collapsed to their lowest levels since 2005. Looking at outstanding orders to remove metal they haven’t bottomed out just yet.
4. China has been increasing its infrastructure spending after the fall out from COVID-19 induced shutdowns and this has also been helping copper demand. Investors are generally gaining in excitement over copper with
5. Citi just laying out a bull case for prices at $8000/ton. Alongside these CFTC figures show longs are increasing.
6. There are also some bright copper-positives out there. The US housing starts which have been doing well are positive for copper as a home building needs copper.
7. Furthermore, there is also a growing rise in green technology. This will be copper positive due to the very high demand for copper in green technology.

This makes a very good case for medium-term copper buyers. In terms of where to join this move price is already quite extended to the upside, so look for buyers on pullbacks. The main risks to this outlook are if we see a sharp reduction in demand on COVID-19 second spikes and related lockdowns. Also, if Chile’s copper supply picks up sharply this will also weigh on copper prices.

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Market Mood GBPCHF 09.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the GBPCHF pair on Youtube.



Weak GBP, Strong CHF

The GBP is weak after UK’s PM Johnson is set to introduce a new Internal Markets bill in the UK. This bill is reported to undermine the terms agreed in the withdrawal agreement signed by the UK in Jan 2020. The deadline for an agreement is October 15 and the negotiations are now stepping up with both sides digging in.

The CHF is strong as risk-off sentiment flows through the markets supporting the JPY and USD alongside CHF.

The GBPCHF pair has broken a key daily trend line and a 50 point move lower from 1.1899 could be on the table. Expect sellers at the market.

Trade Risks:

1. Positive progress in the UK trade deal with the EU.
2. SNB intervention to weaken the CHF.
3. Any positive sentiment which reverses the present risk-off mood.

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Why Australia’s tensions with China could weigh on the ASX 200
by Giles Coghlan, Chief Currency Analyst at HYCM

A general rule in trading is that what’s good for China is also good for Australia. So, Chinese growth will boost Australia’s economy (ASX200) and strong Chinese data will support the AUD higher. Why is this the case?



The reason is simple. Around 30% of Australia’s economy is made up from Chinese trade. As a result, the Australian economy itself is oftentimes traded as a proxy (alternative) for China’s economy. The AUD is also traded as a proxy for the yuan. This ‘piggybacking’ benefits Australia’s economy. It is a straightforward trade. However, that trade may be under threat if current tensions between China and Australia keep building.

The recent departure of Australia’s last 2 foreign correspondents in China is the latest episode in a series flare-ups that have emerged after Australia’s Prime Minister Scott Morrison called for an independent inquiry into the origins of COVID-19. This triggered a retaliatory response from China and Beijing has since suspended shipments of barley, stopped some beef imports, and launched an anti-dumping investigation into the wine industry.

According to Jeffries analysts, China’s actions may impact sectors which in fact are covering more than half the weight of the ASX 200. A Bloomberg opinion piece yesterday highlights that banks may also suffer if a slowdown in Chinese immigration weighs on the housing market. Tourism itself that is linked to stocks like Qantas, Crown Resorts, and Star Entertainment could also suffer from a dramatic drop in overseas visitors. If indeed tensions between China become more significant that is one key area to watch.

China has a considerable ability to significantly hurt the smaller Australian economy. The major concern here is that investors might stop looking at Aussie as a proxy for China. If this was the case the ASX would be vulnerable to very large falls. This is not the case right now, but one geopolitical development to have on your radar.

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How a dovish ECB could actually support the EURO
by Giles Coghlan, Chief Currency Analyst at HYCM

There was a Bloomberg opinion piece earlier in the week making a case for a dovish ECB actually supporting the euro and stocks.

Christine Lagarde will want to ‘talk the Euro down’ at the press conference today at 1330BST. This is because a strong euro harms the eurozone’s export markets. Recently the ECB has expressed their concern with a strong euro and is obviously keen to see EURUSD below 1.2000.

However, there are only a limited number of policy tools she has to use. The median expectations are for €350 billion in extra asset purchases, so some extra stimulus could be added. The ECB could also speed up the pace of asset purchases. Aside from that, there is not a whole load that can be done. A move lower in rates looks unlikely. The negative interest rates approach by central banks across the world has not been embraced by the Fed and that is holding up rates globally for now. Central banks tend to follow the Fed’s lead. The Fed has opted for Average targeted inflation for now.

So, could Christine Lagarde actually talk down the Euro and eurozone growth prospects and end up supporting the Euro and stocks? The normal scenario for these events is that central banks loosen monetary policy and dovish central bank messaging leads to less favourable interest differentials and a weaker currency. So, if these dovish measures take place then the vanilla response would be euro weakness.

However, Bloomberg is out with a piece suggesting that this time it could be different. Here is their thinking summarised. In the last few months, aggressive bond-buying has been accompanied by a massive injection of fiscal stimulus at a national and EU level. Germany has spent €220billion and pledged to do more. France has spent €57billion and the EU itself has promised €750billion.

This should provide a supportive mix for the eurozone and with it make the shared currency and European stocks more attractive. The heart of the thinking is that a strong and co-ordinated money and fiscal stimulus approach should support the eurozone and the euro.

So, if we see strength for the eurozone out of tomorrow’s meeting this may be why. Certainly, one scenario to keep on top of.



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Market Mood XAUUSD 10.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the XAUUSD pair on Youtube.


Gold prices are tightly coiling up on the daily chart. The meeting today with the ECB could easily trigger a higher move in gold due to the strong impact the EURUSD has on the Dollar Index.

If the ECB is more optimistic about the state of the eurozone and that results in some EUR strength post the ECB meeting today at 1245/1330BST then that will drag the DXY down and support gold. The medium-term picture for gold remains bullish with low central bank interest rates, high levels of QE, and negative real interest rates.

A break and close above the top side of the triangle pattern below will signal a run at higher prices in the near term.

Expect gold buyers on a clean break of $1960.

Trade Risks: A negative outlook from the ECB meeting will weaken EUR, strengthen the USD, and weigh on gold.

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Is the fall in the Nasdaq correction or a deeper slide?
by Giles Coghlan, Chief Currency Analyst at HYCM

This is one of the major questions over the last few days since the heavy falls in US stocks. It is easy to see why as well from a technical perspective. The recent declines in the Nasdaq bear some of the hallmarks of a deeper slide. There are two aspects that stand out. Firstly, the range of selling. Three days of selling from 03, 04, and 08 September (remember Labor Day holiday) have seen price erase over 12 days worth of buying.

Secondly, the break of the June 29 and July 24 ascending trend line possibly signals a deeper correction to the downside.



However, many in Wall Street see this as only a correction

Here is a sample of some of these views from a Reuters piece yesterday:

1. Goldman Sachs repeated their year-end price of 3600 for the S&P500.
2. UBS Global Wealth Management advised clients to ‘ease into the markets’ rather than stay out.
3. SkyBridge’s co-chief investment officer Troy Gayeski regards this as a ‘healthy correction, removing the froth’.
4. However, with the US November elections on the way, not everyone is so optimistic.
5. Stanley Druckenmiller, firmly in the bear camp, warned that the stock market is in a mania fuelled by the Federal Reserve.

So, how do you navigate these kind of markets? Well, one way is to take a look at key technical levels to assess what is going on. Are key moving averages being respected? Has priced just sliced through a key support level? Does the sell-off extend from the Nasdaq to the broader market? Allow the technicals to guide you in these uncertain markets.

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Market Mood EURGBP 11.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the EURGBP pair on Youtube.



Strong EUR, Weak GBP

The latest move by PM Johnson in bringing a new internal market bill to the UK Parliament has increased the tensions between the EU and the UK. The new bill threatens to undermine the already agreed Withdrawal Agreement from January 2020 and has the EU mulling over a legal response to the UK’s plan. This resulted in significant pressure for the GBP.

The ECB revised their growth projections higher for 2020 to -8.0% and inflation expectations for 2021 were revised up to 1.0%. President Lagarde also seems relatively unfazed by the recent euro strength. This more optimistic response supported the EURUSD this week.

Therefore expect buyers on pullbacks on the EURGBP pair.

Trade Risks: A final deal struck between the EU and the UK will invalidate this outlook.

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FX Week Ahead 14.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Brexit’s back with a vengeance! This week saw the specter of Brexit headlines return. The latest move by PM Johnson in bringing a new internal market bill to the UK Parliament has increased the tensions between the EU and the UK. The new bill threatens to undermine the already agreed Withdrawal Agreement from January 2020 and has the EU mulling over a legal response to the UK’s plan. This resulted in significant pressure for the GBP this week and we can expect more GBP volatility heading into the middle of October. Expect GBP sellers as long as this scenario remains.

Key events from the past week

1. CAD: BOC rate decision, Sep 09. The BOC kept rates unchanged at 0.25bps and the QE purchasing of Canadian Gov’t bonds is set to remain at levels of at least C$5 billion per week. The BoC saw the Canadian economy developing broadly in line with June’s projections.
2. EUR: ECB rate decision, Sep 10. The ECB revised their growth projections higher for 2020 to -8.0% and inflation expectations for 2021 were revised up to 1.0%. President Lagarde also seems relatively unfazed by the recent euro strength. This more optimistic response supported the EURUSD this week.
3. GBP: The UK finally remembers Brexit: Sep 09. The GBP had been trading strangely over the last few weeks. It continued to defy gravity with the GBPUSD pair reaching as high as 1.3500. However, with UK Parliamentary recess over, the GBP was sold heavily this week on the prospect of a ‘no-deal’ Brexit.

Key events for the coming week

1. USD: Fed rate decision, Sep16. The key question here for the FED is whether they will adopt yield curve control or move towards negative interest rates. Any positive move towards these to policy tools will weaken the USD.
2. GBP: BoE rate decision, Sep 17. The BoE faces multiple pressures: Rising COVID-19 cases, Brexit risks, and a slew of businesses likely to struggle with debt repayment into year-end and beyond. Will this force the Bank of England to move towards negative interest rates and weaken the GBP further?
3. AUD: Employment data, Sep 17. The AUD has been supported on higher commodity prices and a continued recovery in global growth over the last few weeks. A strong employment print will be helpful in supporting further AUDNZD upside towards 1.10.

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There may be trouble ahead?
by Giles Coghlan, Chief Currency Analyst at HYCM

At least that’s what risk markets are telling us. Really, that is not a surprise when we look at the kind of the year 2020 has been. Think of what we have through this year – The recent renewal of Brexit risk, COVID-19, upcoming US elections, a constant backdrop of US-China trade tensions, some very highly stretched equity valuations and central banks are now running out of ways to support the economy. When you put all of these issues into only one sentence it is no wonder that volatility has been high this year. In all probability, the volatility is likely to get even higher.

Bloomberg’s Garfield Reynolds compiled a very interesting chart combining the ‘relative fear levels’ of the market to get a sense of what was coming. This was how the fear level was calculated. The Z scores for spreads between 3-month and 1-month vol for the yen and Treasuries. The Z score for 2-month VIX futures vs the VIX. When these were added together it gave the highest combined score on record going back to when VIX futures started in 2004. Have a look at the chart below:



So, with so much uncertainty ahead it is easy to see why some investors will retreat to cash. SO watch out for that possibility. It is very hard to invest in equities at the moment when you consider all the uncertainty there is. So, be nimble in these markets.

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Market Mood ZS1! 14.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the ZS1! on Youtube.



There are some reasons supporting Soy futures. Firstly, a recent US Gov’t report (the WASDE report) has shown lower US reserves and smaller crop yields than expected. Adverse weather in the US has impacted harvests on Soy and corn. Early frost across the Midwest could further harm yields. There are reports that China’s recovering swineherd will increase demand for soy. So, less supply, but more demand is expected to support Soy’s future prices.

Expect Soy buyers on pullbacks to the daily ascending trendline.

Trade Risks:

1. Mild weather in the US
2. Slower swine herd recovery in China

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Big week for central bank meetings
by Giles Coghlan, Chief Currency Analyst at HYCM

Three of the four biggest central banks meet this week: the Federal Reserve, the Bank of Japan, and the Bank of England. You can read a rundown on the central bank’s here.

Here are some of the key things to look out for:

1. The Federal Reserve is facing a tricky situation. The US election is approaching which should result in a ‘stay as we are’ position from the Fed. However, the recent sell-off in tech stocks will be a concern if it falls harder, so the Fed may want to step in to support stocks. One way they could do this would be by introducing the idea of yield curve control. If the Fed embraces YCC that will supportive for stocks and weaken the USD. Watch for a gold breakout higher in that situation.
2. The Bank of England. The UK faces a struggling economy, a COVID-19 uptick in cases, and Brexit risks back with a vengeance. The BoE can either increase QE, cut rates / move towards negative rates, or even do both. If the BoE move towards negative rates expect the GBP to fall lower.
3. The Bank of Japan may feel inclined to support PM Abe’s successor Yoshihide Suga. Watch out for Suga calling a snap election which could cause the Yen to rise on the risk of ‘Abenomics’ coming to an end. The BoJ should play second fiddle to politics at their upcoming meeting and no change is expected for now.

Take a look at the gold chart below. A dovish Fed will create a perfect environment for further gold strength.

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Market Mood USOIL 15.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the USOIL on Youtube.



The monthly OPEC oil report yesterday showed that oil demand growth for OPEC crude was revised down by 700K bpd to 22.6 milk bpd for 2020. The demand growth was revised down even further for 2021 by 1.1mln bpd to 28.2mln bpd.

The 2020 demand cut was due to weaker oil demand performance in the sector called ‘other Asia’, especially India. OPEC says a negative impact on oil demand in ‘other Asia’ is projected to spill over into 1H21 with slower recovery in transportation fuel demand in the OECD countries.

OPEC says risks remain elevated and skewed to the downside, particularly with COVID-19 related risks.

The weaker outlook for oil means that any rallies higher will find sellers. In particular, the return to the broken trend line on the daily chart looks an ideal spot for fresh sellers to enter.

Trade Risks:

1. A vaccine/successful treatment for COVID-19
2. A faster return to global oil demand

The latest ECB meeting creates a problem for the SNB
by Giles Coghlan, Chief Currency Analyst at HYCM

At the last ECB (European Central Bank) meeting last week the ECB revised their growth projections higher this week for 2020 to -8.0% and inflation expectations for 2021 were revised upwards to 1.0%. The EUR received a lift. Although going into the last ECB meeting last week ECB’s Lane had expressed concerns about a strong euro President Lagarde also seems relatively unfazed by the recent euro strength. However, a strong euro does hurt the European export market and the ECB will not want to see it strengthen.

The SNB (Swiss National Bank), on the other hand, does want a strong euro. Or at least it is part of their mandate to buy euros to try and alleviate some of the pressure on the Swiss franc (CHF). A strong CHF hurts the Swiss export economy, so they too want (and do intervene) to weaken the CHF. The SNB does this by buying euros. You can see that on their latest sigh deposit report this week where they reached high levels for the year. The total sight deposits were CHF704.1 billion. Take a look at the chart below to see the sight deposit levels:


So this now creates a tension in the EURCHF currency pair where we could have two central banks actively fighting each other. This can create opportunities for nimble investors if either the SNB or the ECB steps up the battle to protect their currency and their export markets. Here is a look at the EURCHF pair with some of the key levels to watch out for. If the ECB starts to talk down the euro watch out for retaliatory verbal interventions on the EURCHF pair. See the chart at the top.


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Market Mood BCOUSD 16.09.20
by Giles Coghlan, Chief Currency Analyst at HYCM

Listen to the latest market mood for the BCOUSD on Youtube.


The demand case for oil has weakened further since yesterday.

The latest report from the International Energy Agency out yesterday showed a 200K bpd cut for 2020 crude oil demand forecast. They maintained their crude oil demand forecast for 2021 unchanged at 91.7mln bpd. This adds to the bearish picture for oil as yesterday’s monthly OPEC oil report yesterday showed that oil demand growth for OPEC crude was revised down by 700K bpd to 22.6 mln bpd for 2020 and down even further for 2021 by 1.1mln bpd to 28.2mln bpd.

Oil prices are likely to remain under pressure and although there has been a bumper number of car sales recently there is not the gasoline demand to accompany it. According to CIBC, the weekly EIA gasoline supplied data, a proxy for consumer demand, continues to hover around ~90% of the five-year demand average for the last nine weeks.

Despite oil rising today on hurricane’s Sally approach into the Gulf of Mexico and a surprise draw in the private oil inventory data, the weaker outlook for oil means that any rallies higher in Brent crude should find sellers if market conditions remain unchanged. Expect Brent crude sellers on pullbacks to 50% Fib.

Trade Risks:

1. A vaccine/successful treatment for COVID-19
2. A faster return to global oil demand

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