The news has been pretty awful for oil over the past few days. But, it’s been stuck at its SMA50 because to go lower would have meant a drop below critical support for SPX. With yesterday’s lame breakout of USDJPY, however, CL finally has some cover while it tags its own important support — which could set the stage for a real bounce.
Of USDJPY and CL, only one can really bounce. Higher oil prices are incompatible with a lower yen. It’s part of the deal between the BoJ and FOMC.
They are allowed to bounce at the same time for only a short period in order to, say, ensure SPX doesn’t make new lows. We saw this yesterday when USDJPY spurted higher, breaking out of a falling channel on a recycled news story in Nikkei (about even lower negative rates) that was released the very minute SPX needed propping up.
It halted SPX’s decline at 1.15 above Monday’s lows. It’s about all central banks can do, anymore — which is a little scary.
As the past several sessions illustrate, the corner into which they’ve painted themselves is getting tighter and tighter.
continued for members…
Sorry, this content is for members only.
Already a member? Login below…