Daily Financial Markets Update: US Equities Stage Late Rally on Oil Bounce – Feb 25, 2016

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Daily Financial Markets Update: US Equities Stage Late Rally on Oil Bounce - Feb 25, 2016

US crude oil inventories rose by 3.1 million barrels, according to the latest report from the Energy Information Administration, higher than the projected increase of 2 million barrels and the previous rise of 2.1 million barrels. However, this figure was lower than the previously reported gain of 7.1 million barrels from the American Petroleum Institute, allowing traders to ease up on their oversupply fears.

WTI crude oil recovered to $32.20/barrel and Brent crude oil rallied to $34.41/barrel. USDCAD retreated to the 1.3700 mark, CADJPY bounced close to retest the broken support at 82.00, EURCAD is down to 1.5057, and GBPCAD broke below the 1.9100 mark.

Higher-yielding assets were also able to join in the risk rallies, paving the way for US equity indices to close higher at the end of the session. Other commodity currencies such as the Aussie and Kiwi jumped in the risk-on bandwagon, with AUDUSD rising to the .7200 levels and NZDUSD recovering to a high of .6665.

British pound still dragged lower by Brexit fears

Perhaps the only currency that wasn’t able to take advantage of the pickup in risk-taking was the British pound, as Brexit headlines still spooked investors from putting money in the UK economy. Outflows from the region led GBPUSD to tumble to a low of 1.3878, GBPJPY to fall to a low of 154.74, EURGBP to push past the .7900 handle, and GBPNZD to break below 2.0900.

Even the euro was barely able to take advantage of the risk rallies, as it chalked up meager gains against the dollar and the yen while still weakening to the commodity currencies. EURUSD  bounced to the nearby 1.1000 mark, EURJPY pulled up to a high of 123.61, EURAUD quickly retreated from the 1.5375 area, and EURNZD is down to 1.6525.

Japanese yen gives back some gains

With the risk-on market environment, the lower-yielding Japanese yen was forced to return some of its recent gains. USDJPY bounced off the 111.00 mark, AUDJPY rallied close to 81.00, CADJPY retested the broken support at 82.00, and NZDJPY climbed back above the 74.50 area.

Forex traders also probably reduced their yen holdings ahead of Japan’s CPI releases on Friday. The Tokyo core CPI is expected to print a flat reading while the national core CPI could show a 0.2% decline, possibly reigniting speculations of additional BOJ easing and triggering more yen losses.

 

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.