Hey Valutraders! Have you seen the backwardation on WTI!
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I’m Brad Alexander and in this week’s Market Blast Fundamentals let’s take a look at Gold (XAUUSD), GBPCAD, EURCAD, USD Index, and WTI (US Oil).
If you don’t know what backwardation is, it’s the opposite of Contango.
Basically, Backwardation means that the Future Price is lower than the spot price which usually means that buyers expect prices to fall.
This is logical with Crude Oil due to the predicted lack of demand due to the impending global recession and continued lockdowns in China.
The spot price of WTI is called USOilCash on the Valutrades MT4 platform and is currently in the $86 range.
The January Futures contract on WTI can be found on USOilJan and the current price is lower than the Spot Price in the $85 range.
We see this as a selling opportunity on Crude Oil and we will look at this from the technical standpoint tomorrow.
This fall in Crude oil will likely affect the CAD which is showing mixed strength and weakness right now.
So, if we expect a weaker CAD, and we want to trade with the trend, we will look at pairs like GBPCAD and EURCAD and long positions.
The USD Index is rising again but not quite back to the levels of the last few weeks.
This has had the opposite effect on price action on Gold and we still have room to fall to the next key level in the $1620 area.
As you can see we have lots of economic news this week with the key item being the US Federal Reserve announcing the latest Interest Rate decision.
We expect a 0.75% rise, from the current 3.25%, which will see the USD Index rise and price action on Gold go lower.
Anything less than 0.75% should have the opposite effect.
Tomorrow we have an Interest rate decision from the Reserve Bank of Australia and from the Bank of England on Thursday.
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