New Iranian oil could be ending Oil’s bull run
A nuclear energy deal with Iran is the prerequisite for Iranian sanctions to be lifted. Those possibilities got a step closer today and the oil market traders took the opportunity to sell from the recent highs. Dropping oil will lead to a drop in the CAD and add that to a bullish dollar and the USDCAD should go higher too.
Market Wrap
If you're a big pharma company and the world is in a pandemic, you're probably going to have a good year. Especially if the science says the people of the world could do with having multiple doses of your vaccine. According to Pfizer Inc. (PFE), its revenue for the fourth quarter of 2021 was $23.8 billion, up 105% from the same quarter in 2020. Diluted earnings per share (EPS) rose from $0.15 in Q4 2020 to $0.59 in Q4 2021, while net income increased from $847 million to $3.4 billion. In the full year 2021 statement, net income rose from $9.1 billion to $22 billion. Despite the good earnings report, the stock was sold off as investors booked profits. This hasn’t adversely affected the S&P500 which is up nearly 1% along with the Nasdaq and DJIA which are up just over 1% at the time of writing.
The US trade deficit for both goods and services rose 27% to $859 billion, an annual record as imports outpaced exports. As Americans bought more foreign goods and prices increased due to strong demand, imports rose 20% or $576.5 billion last year. On the other hand, exports were up 18.5 percent or $394.1 billion. The US dollar index is trading sideways and currently, the m30 200-period EMA is dynamic resistance.
On Tuesday, the OPEC Bulletin issue for December 2021-January 2022 revealed that global crude oil demand is projected to increase by 4.2 million barrels per day by 2022. An increased vaccination rate and improved COVID-19 management will boost the expansion in energy requirements.
The OPEC Bulletin also estimated that the world would achieve economic growth of 4.2% this year. "While some inflationary factors may qualify as temporary, the rise in wages and salaries in affected economies may turn out to be of a more sustained nature," the organization warned.
Crude oil futures prices fell over 2% after talks on the Joint Comprehensive Plan of Action (JCPOA), a.k.a. the Iran nuclear deal, made enough progress for a draft of the final agreement to start to take shape, according to a Russian official. If there is a deal, it could mean that the sanctions against Iran's oil exports will be lifted, which could potentially lead to more oil on the global market and, in turn, cause more oversupply concerns. But for political leaders, the hope would be a drop in rising inflation.
The Canadian dollar is falling as the price of oil drops into the London close. WTI crude had reached a new 8-year high which is also an old support level from 2014. This support level would have been a great target for anyone who had remained long from 2020 lows, so I am going to assume that this is profit-taking until we see a break in the market structure.
The forex heatmap is also looking quite risk-on as the flows are clearly out of the yen and Swiss franc and into the Aussie and Kiwi.
The AUDJPY is a perfect example of a risk-on trade when it is bullish for the day. The close today above the daily 200 EMA would signal buyers have printed a higher swing high and could be targeting the significant highs of 84.293 next.