OPEC Extraordinary Meeting: Missing Signals in a Noisy Environment

OPEC's members gathered in Vienna on Friday to cut production level concerning about oil prices, which has fallen more than 50 percent from its July 147 $/b to about 63 $/b in the last week. However, I was probably wrong for giving it too much weight in my daily assessment.

They finally announced a 1.5 Mb/day cut, when it was almost clear that there would be no cut more than 2 Mb/day and nobody expected to see any significant reaction to such a small cut. In fact, I was too concerned about the possibility of a temporary rally in oil, which didn’t happened at all, and its consequences on the dollar.

I think it worked as a noise, making it difficult to discover signals in the market that otherwise might be very clear. Specifically, and in combination with other factors such as being personally tired, an opportunity was missed for selling sterling at a very cheap price ahead of the U.K. GDP report (see the chart).

However, I made money that night betting on the positive reaction from the Canadian dollar, and I was completely true in closing the position (long on CADJPY) on perception of fading technical signals.

Jeddah Summit, Euro PMI, German IFO; Betting on the limits

Some OPEC members showed willingness for limiting oil price, at least in their words, which could work in the short term, and selling oil is usually dollar positive. This Monday might is not a promising day for Euro when Purchasing Manager Index for France, Germany, and Euro-zone, in addition to German IFO Business Climate all are expected to show weakness in euro area. Anybody who wants to buy Euro may find it at a cheaper price in the next 10 hours.

So, I decided to sell EURUSD at 1.5634, when technical data looks relatively supportive.