Energy currencies slide as IEA predicts unprecedented demand shortfall
The price of crude oil dropped sharply after a blistering report by the International Energy Agency (IEA). The organisation warned that demand will fall by more than 9 million barrels a day this year. In April and May, the organisation said that demand will drop by more than 29 mb/d and 26 mb/d respectively. The report came a day after Texas oil producers differed on the way forward. The big energy companies like Exxon have opposed the measures to curtail production, which could lead to bankruptcies among shale producers if price remains this low. The WTI dropped to a low of $19.60, which is its lowest level since 2002. Brent, on the other hand, declined to $28.40.
US futures pointed to a lower open as investors continued to watch the stream of company earnings coming in. Today, Goldman Sachs released its results, which showed that the company made more than $8.74 billion in the quarter. It earned $3.11 per share on net earnings of more than $1.2 billion. Its investment banking revenue was $2.18 billion while its global markets were $5.16 billion. Its consumer banking revenue rose to $1.49 billion while its asset management division lost more than $96 million. It increased its provision for credit losses to $937 million from last year’s $224 million. Meanwhile, Bank of America reported revenue of $22 billion and a net income of $4 billion. The income declined by 48% from the previous year because the company increased its provisions to $4.8 billion.
The Canadian dollar, and other oil currencies, declined by more than 2% due to the falling oil prices. The market is also waiting for the Bank of Canada to deliver its interest rates decision. Most analysts surveyed by Bloomberg expect the bank to leave rates at 0.25%. Also, they expect the bank to tweak parts of its policies to accommodate the deteriorating economy. Meanwhile, data from the US showed that retail sales declined by 8.7% in March while the New York manufacturing index fell to its lowest level on record.
The XBR/USD declined to an intraday low of 30.20 as investors continued to worry about demand and supply. On the hourly chart, the price is trading below the 14-day and 28-day exponential moving averages. The price is also between the 50% and 38.2% Fibonacci Retracement level. The pair may continue falling ahead of the official US inventory data that will be released later today.
The EUR/USD pair dropped to an intraday low of 1.0900 as the market reacted to a slew of economic data and news. The pair is trading slightly above the 14-day and 28-day exponential moving averages on the hourly chart. It is also trading along the important support level shown in green. Therefore, the pair is likely to be bearish if it manages to move below this support. If it does, it is likely to test the support of 1.0850.
The USD/CAD pair rose to an intraday high of 1.4072 as the price of crude oil fell. As the price rose, it moved above the 50% Fibonacci Retracement level, where it found some significant support. Also, the price rose above the 14-day and 28-day exponential moving average, which have made a bullish reversal pattern. While the pair may continue rising, there is a possibility of increased volatility after the BOC releases its rates decision.