WTI gap on Wednesday night - explanation?

[options-george]

Looking at the charts this morning, I don't understand the large up-gap (about 200 points) in WTI last night.

My understanding is that WTI rallied strongly on the dovish FOMC comments because the dovish comments caused US dollar weakness. As WTI is denominated in US dollars, WTI rallied on the dollar weakening. It rallied from around $42.50 to $45 at 9pm GMT.

However on my charts (on FXCM) WTI gapped from $44.70 at 9.10pm GMT to $46.60 at 10.30pm GMT. Looking at the USD pairs (such as GBPUSD or EURUSD) the dollar seem to have stabilised during this time period, so I don't understand why Oil rallied further.

Can anyone enlighten me on this?

 

[globalarbtrader]

Often correlations change and weird market moves happen because a bunch of leveraged funds have the same positions on across different markets.

Both crude and currencies vs dollar have been in big downtrends, so CTA's are likely to be both of these trades (I run a very similar system to these). If you're leveraged enough then you'd have to liquidate both of them at the same time. This also explains the timing gap, EURUSD moves, funds see losses, need to deleverage, so sell other large positions.

 

[Martinghoul]

Looking at the charts this morning, I don't understand the large up-gap (about 200 points) in WTI last night.

My understanding is that WTI rallied strongly on the dovish FOMC comments because the dovish comments caused US dollar weakness. As WTI is denominated in US dollars, WTI rallied on the dollar weakening. It rallied from around $42.50 to $45 at 9pm GMT.

However on my charts (on FXCM) WTI gapped from $44.70 at 9.10pm GMT to $46.60 at 10.30pm GMT. Looking at the USD pairs (such as GBPUSD or EURUSD) the dollar seem to have stabilised during this time period, so I don't understand why Oil rallied further.

Can anyone enlighten me on this?

Didn't that coincide with a large EURUSD spike (nearly to 1.10)? I recall it happening right arnd the same time, in which case it's still all about the dollar.

 

[options-george]

Didn't that coincide with a large EURUSD spike (nearly to 1.10)? I recall it happening right arnd the same time, in which case it's still all about the dollar.

Thanks for your reply!

So that's what I had thought too. At the time that EURUSD spiked (prior to 9pm GMT), WTI also rallied. However during the time period that WTI was closed for trading, the dollar pairs went sideways/flat. On that basis, I didn't think the dollar correlation was a plausible explanation.

??