Forex and commodity markets

As we know together that the exchange rate of a currency is a mirror of the economic conditions of a country. Although it is not always proportional but after that we simplify the statement that when a country's economy is good then its currency is likely to strengthen. Again not always but this trend arguably large enough.

OK, enough berbasa-basinya. Now let's get on with it, we give you a simple example case. If you pay attention to the movement of the U.s. Dollar lately, then you will see that the movement of USD sangan closely related to two main conditions:

1 developments in the stock market (in this case the index Dow Jones became his Deputy).

2 the price of crude oil traded on the NYMEX

The second point is very closely related to the exchange rate of the American Dollar. When the stock market experienced a rise normally USD terkerek rise. participate Conversely when oil prices go up then the USD tends to weaken.

This time we will focus on the discussion of point 2 How to influence commodity sector with the exchange rate of a currency. Not only the oil prices, we will also discuss some other commodity that is closely related to the exchange rate of a currency that we tradingkan everyday

Oil prices, USD and CAD, NOK

Crude oil recently was one of the most sexy commodities in relation to his ascent to reach 50% within the next few months. We need to understand together that the current world energy needs are still very dependent with fossil energy. Petroleum along with natural gas and coal still accounts for more than 80% of the world's energy needs (including United States that in fact is the most energy consuming countries).

Gambar 1. Persentase penyumbang kebutuhan energi Amerika Serikat. Sumber: Energy Information Administration

 

Well if You look at the chart above seen that fossil fuels still holds 86% of current energy sources heading. And the bad news is 40% contributed by petroleum! What does it mean? It is the petroleum is one of the most important commodities ever traded commodity exchanges. Because energy is required in the modern economic activities (what there is of a one-day course You never use fuel at all?), then the economies of countries in the face of the Earth is very sensitive to the price of petroleum.

Be grateful to those countries that have abundant petroleum reserves. Countries such as Iran, Dubai and Russia are of course highly benefitted with bountiful oil reserves they have. In Venezuela even price one liter of gasoline is not more than Rp 300 silver!! Yeah right! Guns there is a typo, kok beneran three hundred silver. So remember the 1980s used to be Yes?

Well what about countries that do not have sufficient oil? Yes, of course, have to import. United States for example, the country has no oil reserves that are valid and are ready to meet the needs of the oil in her own country. Coupled with the magnitude of the country's oil consumption by Uncle Sam, the US being one of the countries that are very sensitive to price hikes. See the diagram below:

 

Well this is the data for the year 2006. Don't expect the 2007 or 2008 levels of konsumsinya lower. On the contrary it higher. And note, U.S. oil consumption is nearly 3 x folding even for fast-growing countries like China!

Data collected learn Forex noted that the United States was only able to produce 8.330.000 barrels of oil per day. Thus other barrel 12.357.000 must be imported. Multiply it by 365 days you'll get how big oil needs US in a barrel. Well if the oil rising 50 Dollars for 6 months lately, calculate a little bit then you will get a nominal approx. 225,5 billion Dollar US which must be added by Uncle Sam to finance its oil consumption. If that kind of money to eat in warteg can how plates Yes (which it hadn't counted)?

Up to here have you obtained a description of why it is so crude oil experienced increment of U.s. dollars will soon be weakened? True! With the rise in the price of crude oil and consequently costs incurred by the Government to cover its energy needs would further swell the deficit, the balance sheet will be even greater, and the economics of joints become weakened. As a result, of course, the US Dollar will experience significant impairment. Now let's see the application:

Figure 2. Graph the movement of EURUSD weekly, April 15, 2007 to August 02, 2008. Experienced a significant strengthening of the EURUSD looks

Figure 3. The price of crude oil, January 15, 2007 to August 02, 2008. EURUSD charts look similar to?

 If we think this is just a coincidence, we are wrong. Such a pattern has been going on since the rise in world crude oil prices since early 1980s. Yes of course don't compare it with EURUSD since 1980s EUR not published. You can compare it with the GBPUSD for example.

There is one more reason why when the price of oil rising U.s. Dollar experienced a weakening. The other reason is because world oil prices are pegged in US dollars. This logic is actually the upside-down logic but lately cederung experienced kevalidan.

I meant upside down is because it basically was started first by the weakening Dollar, the impact on the oil and then back again into a snowball that is increasingly weakening Dollar. When forex traders saw the USD tends to be weakened, and thus any institution which has a reserve of funds for its oil needs require more expensive to get a Dollar per barrel fuel. As a result they were forced to divert is a backup Fund that they had no longer to the U.s. Dollar but to other currencies more stable such as the Euro or the Pound. Of course this action resulted in massive selling against the Dollar. As a result the Yes of course the Dollar would further weaken (this is what is meant by a snowball). So begins first with the weakening Dollar, rising oil prices and back again with the weakening of the Dollar. We hope you understand.

Thus one valuable lesson we take note of the first commodity in connection with the forex market:

 

Lesson 1: USD tends to weaken when oil prices increase.

Next let's look at the relationship between the price of oil with Norway and Canada. Another United States with other Canada and Norway. If the US is the world's largest oil importer, Canada is one of the country's renowned exporter of oil and has the second largest oil reserves after Saudi Arabia. The same thing also applies to Norway. May rarely know that Scandinavian countries it is one of the country's exporters of oil. In 2007 Canada exported 1.888.000 barrels per day to the United States. Meanwhile, Norway is an exporter of oil to the world's largest 4-with a nominal total of 2.542.000 barrels per day.

Thus, if the price of oil should increase the economy of Canada and Norway grew prosperous instead? At least so forex traders assumed. Thus the exchange rates of the two countries will strengthen against the Dollar or the Yen Japan for example. Oh yes, Japan is also one of the largest oil consumer. Third after the U.S. and China.

OK let's see pembuktiannya:

USDCAD Weekly January 7, 2007-August 02, 2008. Seems to graphics, strengthened CAD down.

The price of crude oil, January 15, 2007 to August 02, 2008.

 

Now shows significant correlation instead. For those of you who have yet to understand, forex charts for the pair USDCAD will move down when his CAD strengthened. This is due to the writing of this couple is not the USDCAD CADUSD. In contrast to the EURUSD, where EUR mentioned earlier compared his USD.

Now what about the Norwegian Krona? Well setali three money.

 

USDNOK January 2007 until August 2008. The RIDGES tend to be strengthened against the USD.

 

Norwegian Krona indeed rarely traded by traders in Indonesia. Perhaps because not many brokers who provide it. In fact it can be one alternative very interesting transaction partner.

The second lesson: when the price of oil strengthened the Dollar, Canada and Norwegian Krona tends to be strengthened.

Well it's already pretty clear not why crude oil greatly affects the exchange rates of some countries? Indeed not all. Some countries that are extremely vulnerable to oil prices is US, Canada, Norway and last is Japan. Unfortunately we are not able to play forex with Real Saudi Arabia or Kuwait for example the country's currency. But suffice it to some country.

In certain cases notably when conditions are extremely volatile commodity exchanges, reports U.S. oil reserves can also affect the exact value. When the United States declining oil reserves and its currency also tends to decrease due to the action of the panic selling on the USD. This does not apply at all times just in the moment oil is being noticed by most commodity trader.

OK, a little explanatory captions, the same thing also applies to Japan that the Yen is indeed a State oil consumers as well. So this logic is valid also for the Yen.

At our next discussion will again discuss some vulnerable currencies with changes in commodity prices. But this time no longer with crude oil but other mining items. Please proceed to the next article.