OIL: Brent Options Skew Turns Slightly Less Bullish
The bullish Brent crude options skew is softening slightly today and WTI skew turning more negative as futures continue to pull back from a high mid last week. The skew to the upside was driven by tighter global supply concerns due to sanctions on Russia and Iran but ongoing China demand concerns and potential for increased OPEC+ supply in Q2 are helping to limit upside.
- Front month crude is pulling back after U.S. President Donald Trump declared a “national energy emergency” to be able to increase US domestic oil and gas production and reverse Biden’s climate change policies.
- The slightly higher US dollar today has added to the oil price downside. Trump said on Monday night that he planned to impose previously threatened tariffs of as much as 25% on Mexico and Canada by Feb 1.
- The Brent second month 25 delta call-put volatility skew has eased lower to about 0.7% today and the WTI skew is now around -0.4%.
- Aggregate Brent crude traded volumes have fallen in the last couple of sessions back to near normal after the high levels seen early last week. Options traded volumes yesterday showed more call volumes than puts again after a brief switch in favour of put volumes on Jan. 17.
- Brent MAR 25 down 1.3% at 79.14$/bbl
- WTI MAR 25 down 2% at 75.84$/bbl
Source: Bloomberg
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USDCAD TECHS: A Pullback Would Be Considered Corrective
- RES 4: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 3: 1.4537 2.0% 10-dma envelope
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4356 @ 16:56 GMT Dec 20
- SUP 1: 1.4301 Low Dec 18
- SUP 2: 1.4174/4014 20- and 50-day EMA values
- SUP 3: 1.3928 Low Nov 25 and a key support
- SUP 4: 1.3822 Low Nov 6
USDCAD bulls remain in the driver’s seat. While price faded into the Thursday close, the recent breach of 1.4178, the Nov 26 high, confirmed a resumption of the uptrend and this maintains the price sequence of higher highs and higher lows. The latest rally opens 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4174, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Bearish Trend Structure
- RES 4: 0.6550 High Nov 25
- RES 3: 0.6501 50-day EMA
- RES 2: 0.6429 High Dec 12
- RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
- PRICE: 0.6263 @ 16:55 GMT Dec 20
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA.
