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Incredible rally in the oil market

3 April 2020

We conclude the week with the issues surrounding financial markets which of course is a, lack of liquidity and, as a result, panic. I will begin today's review with an event that occurred on Wednesday, April 1. Just before the opening of the American trading session which is also the end of the trading session in London, we observed incredibly strong growth of the AUD throughout the market. It is worth noting that the growth of the AUD/USD pair, which exceeded 130 points, lasted only 5 minutes, and over the next 5 minutes, the currency was sold off and more than half of the gains were lost.

Given the nature of the price movement, I can assume that the reason is the lack of liquidity at the time of opening of one trading session while the other session was closing
Another strange factor this week was the sudden rise in oil prices. We are talking about a record daily growth in the price of American WTI grade oil, which exceeded 30%. At the same time, a significant part of the upward movement occurred in less than an hour and exceeded $ 5. In this case, the driver of such a rally was Donald Trump's statement where he is confident that Russia and Saudi Arabia will reduce oil production by 10 million barrels, and possibly more.

Since this is almost half of the total production by these countries, the likelihood of such a scenario is slim. Accordingly, I assume that we are talking not only about Russia and Saudi Arabia, but about the whole OPEC cartel and its allies, which produce more than 40 million barrels per day. Given the current oversupply of oil, which is already estimated at 35%, I believe that OPEC+ will find a compromise to support the oil market and its own economies.
Moving to the American trading session, I will draw your attention to the upcoming publication of the latest labor market statistics. Given the disastrous figures on the initial applications for unemployment benefits, there is a risk the latest figures will be below analysts’ expectations and I expect weakness in the USD.

We will conclude this issue with an overview of the EUR/USD currency pair. After a false breakdown of resistance at 1.0950, it was decided to open a short position when retesting this level. A Stop Loss was set at the previous maximum, and A Take Profit at 1.0850. As we can see now, the pair collapsed under the psychological level of 1.0800, which allowed the trader to earn $1000 with minimal risk.

The above review is not a direct guide to trading, and can only be classed as recommendations.



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