US WTI Oil and USDJPY Analysis – February 13, 2018

The International Energy Agency (IEA) today published their forecast for oil demand growth in 2018 at 1.4 million bpd from a previous projection of 1.3 million bpd. However, the boost in output, particularly in the U.S., will outweigh any growth in demand and increase global oil inventories. The IEA reported, “Today, having cut costs dramatically, U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth”. In the daily timeframe, WTI reversed from the 66.0 handle and declined to the October resistance trend line and horizontal support at 57.90. WTI now appears to be consolidating around the 59.0 support level. Continued downward pressure and a break of 59.00 would again find support at 57.90. After this, WTI could see deeper declines to the 38.2% Fibonacci retracement of the entire move from June 2017 at 57.15, followed by 56.0. Upward swings in WTI will likely be capped, with resistance at 60.30 and then 61.0. USDJPY USDJPY is trading below the 108.0 handle today, amid continued risk-aversion and the likelihood of Bank of Japan (BOJ) governor Kuroda being reappointed for a second term. There are also reports of a possible “stealth or back door tapering” by the BOJ, in a bid to allow longer-term interest rates in Japan to rise without reducing QE size. In the daily timeframe, USDJPY has broken a long-term resistance trend line from 2012 to trade below 1.08. A close below 1.08 would result in further declines to near-term supports at 107.30 and 106.70. After this, the 105.50 level may become visible. A reversal would find initial resistance at 108.40 and then 109.20.