Crude price recovery needs supply glut yet to rebalance: The commodity markets seem to be cautious on price recovery in both base metals and oil to recover through 2016. On the other hand, the underlying forces of the markets are quite diverse.
Crucially, demand is rising and will continue to do so. The oil market still eyes on a rebalancing to correct supply glut, but consequently demand/supply equation is move in sync with pries.
A final drop in prices in response to excess inventories isn't impossible although the storage is abundant, we forecast oil prices towards $60/brl for Brent in Q1 2016.
Base metals and China: On the contrary, base metals were hit by a severe drop in demand from China, which we only presume to be overturned with extreme slowness. The drop in production costs that adds about partially as a result of the fall in base metal exporters' currencies, and the risk of an overshoot to the downside in base metal prices is pretty clear.
We look ahead for steady renminbi deprecation to propel USD/CNY to 6.8 by end-2016, a move of just over 6%. But countries that go from a fixed or managed-peg currency regime to a more free-floating one are at risk of disorderly capital flows and overshoots. An overshoot in USD/CNY to 7.5 on its way to 6.8 isn't likely, but if it happens, we wouldn't be surprised.
Modest USD/CNY appreciation is enough to encourage our Asian FX Strategist, Jason Daw, to recommend short CNH vs DXY, as well as USD/CNH call spreads on a six-month view, and longs in USD/KRW and USD/TWD. If those are attractive trades on a 6% CNY devaluation, they are worth having for the outside risk of a much bigger move.
We still see further weakness in CNY/CNH exchange rate in the foreseeable future.
Hence, it is recommended to buy either 3M USD/CNY forwards of march expiries.
This style of derivative instruments is quite suitable for Small scale international traders as forward contracts does not cost of hedging upfront but provides hedger with a predetermined rate of exchange for certainty.
One can even forgo if prevailing spot FX markets are conducive than forwards rates.


FxWirePro USD/JPY consolidates above 160.00 level despite fresh currency intervention threats
FxWirePro:GBP/USD recovers some ground but bears are not done yet
FxWirePro: USD/CNY holds flat amid concerns over Middle East risks and upcoming U.S. CPI
EUR/USD Relief Rally Crashes Into 200/365 EMA Wall: Sell-on-Rise Near 1.1600 Targets 1.1435
Gold Stalls Below $4150 as Hot CPI Fuels Dollar Strength and Safe-Haven Bid Fades
FxWirePro: GBP/NZD edges lower but bias is bullish
USD/CHF Retreats to Key Trend-Line Wall; Buy-Above-0.8000 Strategy Targets Sharp Rally to 0.8150
FxWirePro- Major European Indices
FxWirePro: EUR/ NZD consolidating around 1.9855, room for further gains
FxWirePro- Major Crypto levels and bias summary
AUD/JPY Dead-Cat Bounce Halted by EMA Wall; Sell-on-Rise Eyes 110.50 Target
AUDJPY Rejected at 113: Triple EMA Bearish Stack and Surging ADX Point to 110.50
FxWirePro: GBP/AUD maintains bullish bias with focus on 1.9100
FxWirePro: AUD/USD eases as middle east peace progress ebbs
FxWirePro- Major Crypto levels and bias summary




