Crude oil insights of Japanese Yen, U.S. Dollar

While it is always challenging to make macroeconomic assessments based on technical analysis, it seems like CME Group WTI Crude Oil Futures and CME Group Japanese Yen chart (Yen-USD)  suggest a “risk-off” or “flight-to-safety” story.

First, let’s look at the weekly WTI Crude Oil chart below showing a descending triangle. If market breaks the $51/bbl. area it could set-up for a longer-term retest of $43/bbl. area. Although the Crude Oil chart as a standalone could simply mean overproduction (as we saw from 2014-2016), strength in the Japanese Yen chart suggests that crude oil weakness might mean economic softening, demand destruction and a flight-to-safety

Weekly CME Group WTI Crude Oil

 

In addition, the daily continuous WTI Crude Oil chart below tells a similar story, only here we are seeing a symmetrical triangle which has clearly broken to the downside. Note that a close above $61/bbl. might invalidate this economic weakening scenario and bring a retest of the $76/bbl. area. Such an invalidation could be the result of any number of bullish fundamentals including a trade agreement with China or some good economic numbers out of the US, China or Eurozone.

Daily continuous CME Group WTI Crude Oil

Now let’s look at the monthly CME Group Japanese Yen Futures chart (Yen-USD) below which is showing multi-year strength via the long-term uptrend line. While the monthly chart itself is not a risk-off, flight to safety story, more recent action in the weekly chart below, shows that the old resistance at .009400 area was broken at the beginning of August 2019 and has served as support ever since. This too supports our stronger Yen view and, together with the bearish view on Crude Oil, suggests the economy might be weaker than some pundits believe.

Monthly CME Group Japanese Yen Futures

That stated, a break of .009150 area (the 8/1/19 low), would invalidate our view. As stated above, such a break could be the result of any number of bullish fundamentals including a trade agreement with China or good economic numbers out of the US, China or Eurozone.

Weekly CME Group Japanese Yen Futures

Stay ahead of the rapidly changing crude oil prices with DTN ProphetX Energy Edition.

 

Disclaimer

The material in this presentation should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice.

All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. Readers are cautioned not to place undue reliance on these forward-looking statements. DTN does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner.

Forecasts and hypothetical examples are subject to uncertainty and contingencies outside DTN’s control. Past performance is not a reliable indication of future performance.