Energy risk managers would have a much easier life if they knew for sure when one trend has ended and another has just begun. Are there any reliable tell tales that may help with this task?
The US dollar relationship with the energy complex, along with a 13th century Italian mathematician, Leonardo of Pisa, may provide the insight needed.
The energy complex has been moving this year in an inverse relationship with the US dollar.
This week the US dollar recovered most of October's losses, gaining 300 points vs. the euro. This retracement from $1.50 to the $1.47 handle coincides with a powerful Fibonacci ratio. Fibonacci ratios, explored and popularized by Leornado of Pisa's work, Liber Abaci, are powerful in currency trading because investors tend to take profits or put on new positions based upon whether the "Fib" ratio provided directional support or signaled continuation of a trend by not holding directional resistance.
Currency traders will be watching this $1.47 level to see whether the dollar can significantly close below this "Fib' support number, signalling the strengthening dollar will continue, and allowing traders to place trades ahead of the massive economic data coming out this week.
For traders who prefer ignoring the technical patterns and would rather rely strictly on the fundamentals, pay close attention to Federal Open Market Committee comments coming from Ben Bernanke on meetings ending Wednesday of this week. Any talk of interest rate increases, will send the US dollar sharply higher and energy prices lower.
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