Edge Forex

Tag: crude

  • Silver vs Oil: Which Performs Better When Crude Spikes?

    Silver vs Oil: Which Performs Better When Crude Spikes?

    When crude explodes higher, most retail traders rush to gold or jump straight into USD trades. The pros? They glance at one forgotten spread first — silver vs oil.

    Picture 2022 again. Brent shoots past $120. Social media screams “supercycle.” Emerging market traders panic as currencies wobble. Yet in the middle of the chaos, something interesting happens. Silver stalls early, then rips weeks later while energy cools.

    I remember watching this trade play out: oil bulls got euphoric, EMFX desks hedged frantically, silver sat quietly — and then flipped the script. That spread told the truth earlier than the headlines.

    This isn’t theory. Inflation cycles and oil spikes often trigger a two-phase play:

    1. Oil surges on supply/geopolitics
    2. Silver catches fire once sticky inflation becomes obvious

    The puzzle traders ask: who wins first, who wins bigger, and how does INR react? That’s where it gets spicy.

    Why Silver vs Oil Matters in Real Macro Storms?

    Oil shocks don’t just raise pump prices. They shake liquidity, policy outlooks, and EMFX nerves.

    Oil spike impact path:

    • Energy importers panic
    • Inflation expectations rise
    • Central banks shift tone
    • Risk assets wobble
    • Safe-haven and real asset bids appear

    Silver reacts more slowly than gold early in shock phases, but it shines when inflation sticks rather than spikes.

    Oil’s move = supply/geopolitical first.
    Silver’s move = inflation + monetary + industrial demand later.

    This is why chasing crude after headlines rarely wins. Smart traders look for divergences between the two.

    And yes, this spread gives a subtle read on markets like India, where every oil uptick pokes INR sentiment like a sharp stick.

    Real trader energy: The Spread tells you Stress Better than Twitter does

    A trick many macro desks use:

    When crude breaks higher without silver participation, it often signals:

    • temporary supply shock
    • no broad inflation panic
    • EMFX weakness ahead

    When will silver catch up fast after oil?

    • market pricing sticky inflation
    • Retail hedging behavior is rising
    • global macro desks reallocating into metals

    This is where professional traders take notice. Retail rarely sees it early.

    Small data snapshot — oil leads, silver follows

    EventOil reactionSilver reactionMarket mode
    Russia-UkraineExplodedLagged then spikedInflation panic + EM stress
    2014 oil crashCollapsedSlid slowerDeflation scare
    Covid reflationRippedOutperformed months laterLiquidity + industrial demand

    Pattern? Oil shocks ignite fear. Silver thrives when inflation proves sticky.

    India angle: Why this spread whispers INR moves

    India imports ~85% of its oil. That alone makes crude spikes a currency story, not just an energy one.

    When crude rallies sharply:
    • fuel inflation rises
    • RBI stress increases
    • traders hedge INR aggressively
    • markets price delayed rate cuts
    • silver demand in emerging markets often stays resilient

    Silver doesn’t perfectly hedge INR weakness during oil surges, but it often signals when inflation pressure is real — not just geopolitical noise.

    INSIGHT:
    If oil rises but silver stays cold, INR stress likely builds.
    If silver heats up, the inflation impulse is real — and INR pain isn’t done yet.

    Trading logic: When to favor silver vs oil

    Use this simplification:

    Oil leads in:

    • supply shocks
    • war risk
    • OPEC cuts
    • shipping disruptions

    Silver outperforms in:

    • sticky inflation phases
    • monetary stress
    • EM retail hedge demand surges
    • precious metal accumulation cycles

    Quick trader logic checklist:

    Crude ripped fast, silver lagging?

      Oil likely front-run. Hedge for silver catch-up.

      Silver rising with oil cooling?

      Market pricing lasting inflation. EMFX still shaky.

      Both ripping?

      Systemic inflation wave. Look at real rates, Fed tone.

      Both falling?

      Demand slowdown risk. Watch PMIs and bond market signal.

      This mindset beats “oil up means buy oil.”

      Case study: Energy shock meets EMFX

      Think of 2022 again. Oil hit $120+.
      USDINR spiked toward all-time highs.
      Gold rallied first, and silver later exploded faster.

      Classic EM panic structure:

      • Crude jumps → INR weakens
      • Fed hawkish → USD strong
      • Inflation sticky → silver ramps hard

      That spread told you the second wave of stress before most media headlines.

      Chart logic explanation (if plotting later)

      A simple way pros look at it:

      Silver/Oil ratio rising
      → inflation regime + EM strain, INR sensitivity increasing

      Silver/Oil ratio falling
      → supply shock, short-term energy squeeze, INR fragility phase

      You don’t need fancy indicators. Just ratio movement + macro context.

      Where traders mess up?

      They think:
      “Oil up = inflation hedge = buy metals now.”

      Reality:
      Crude spikes first on fear. Precious metals move later when inflation sticks.

      Another common mistake:
      Treating silver like gold.
      Silver trades more like “monetary metal + manufacturing stress barometer.”

      You trade it for a macroeconomic regime — not a religion.

      Live scenario thought experiment

      Assume crude hits $110 on OPEC surprise cuts.

      What to monitor:

      • DXY direction
      • fiscal headlines from India
      • RBI comments
      • EMFX basket stress (TRY, ZAR, IDR)
      • Treasury yields

      Silver lagging? Spread widening?
      EMFX weakness incoming, INR especially.

      Silver rising alongside crude?
      Policy stress, possible rate delay, sticky inflation.

      This isn’t correlation trading. It’s regime reading.

      Click here to read our latest article Global GDP Growth 2025: Why the World Economy Is Slowing?

    1. Oil Price Surge: Which Currencies Could Crash if Crude Hits $120?

      Oil Price Surge: Which Currencies Could Crash if Crude Hits $120?

      The oil price has always shaped global markets, but a rapid jump to $120 could shock economies far faster than traders expect. When the oil price rises sharply, currencies vulnerable to oil shock react immediately through rising import bills, widening deficits, and panicked foreign investors. Today, the question is simple and urgent: if crude rockets to $120, which currency collapses first, and why?

      However, the oil price is not only about energy. It also becomes a sentiment gauge for global stress, inflation pressure, and geopolitical risk. When the oil price shoots toward triple digits, emerging markets face an intense squeeze.

      This squeeze exposes energy import pressure on FX reserves and triggers a dangerous mix of oil-driven inflation and currency crisis dynamics. Understanding this chain reaction is essential for traders, policy makers, and everyday investors who want to avoid market traps.

      The oil price is not just another commodity quote. It is a macro signal, a global shock trigger, and a currency stress catalyst. Every FX trader knows this. Every central banker fears this. When the oil price climbs, emerging markets do not just wobble. They fracture.

      Now let us explore which countries stand firm and which crumble if crude reaches $120 again.

      Why a $120 Oil Price Becomes a Financial Earthquake

      Many economies can withstand moderate increases, but the oil price at $120 crosses a threshold. At this level, energy import pressure on FX reserves intensifies dramatically. Importing countries pay more for fuel, which weakens currencies. Oil-driven inflation and currency crisis expectations then accelerate foreign outflows and force central banks to burn foreign reserves to defend exchange rates.

      Several systemic pressures intensify:

      • Higher inflation due to fuel and transport prices
      • Larger trade deficits for energy-importing nations
      • Higher fiscal strain from subsidies or price caps
      • Higher demand for US dollars to purchase oil

      This combination makes emerging markets extremely fragile. Currencies vulnerable to oil shock start sliding rapidly during such periods, especially when the dollar strengthens simultaneously. Emerging markets hate two things: rising oil prices and rising US yields. That combination is a recipe for oil-driven inflation and currency crisis stress everywhere.

      Economies Most Exposed to a Spike in Oil Price

      Countries with chronic trade deficits and limited reserves face the greatest risk. To predict which currencies fall first, we must look at import dependence, debt levels, and reserve strength. Regions with high energy import pressure on FX reserves collapse faster than exporters. Nations with weak policy credibility also fall quickly during shocks.

      The currencies most at risk if the oil price hits $120 include:

      • Pakistan Rupee (PKR)
      • Egyptian Pound (EGP)
      • Sri Lankan Rupee (LKR)
      • Bangladeshi Taka (BDT)
      • Turkish Lira (TRY)

      These currencies vulnerable to oil shock share similar issues. They rely heavily on imported fuel, face structural deficits, and already battle inflation. Meanwhile, oil-driven inflation and currency crisis alarms ring louder in these economies because foreign investors anticipate funding shortages. Markets punish weakness quickly.

      Let us break them down with real context.

      Pakistan Rupee: First in Line for Crisis

      Pakistan has suffered regular currency stress in recent years. A sharp jump in oil prices adds gasoline to its economic fire. Pakistan imports most of its fuel, relies on IMF funds, and has limited reserves. This makes it one of the top currencies vulnerable to oil shocks.

      Key risks include:

      • Limited FX reserves
      • High exposure to imported fuel
      • Price-sensitive population requiring subsidies
      • Dollar shortages under stress

      When the oil price jumps, Pakistan burns dollars fast. That means emergency tightening, currency controls, or rapid devaluation. Energy import pressure on FX reserves will push the rupee lower and create oil-driven inflation and currency crisis pressures overnight. In a $120 world, Pakistan sees immediate panic.

      Egypt: High Debt Meets High Energy Prices

      Egypt has already gone through multiple devaluations. Its currency remains fragile. High oil price levels strain a country that imports wheat, fuel, and industrial inputs. Government subsidies drain the budget quickly when crude spikes.

      Expect:

      • Renewed FX shortages
      • Government subsidy burden is climbing
      • Severe inflation shock risk

      Currencies vulnerable to oil shocks often fail when inflation mixes with fiscal stress. Egypt fits this perfectly. When crude surges, energy import pressure on FX reserves becomes overwhelming. That triggers oil-driven inflation and currency crisis fear among investors. The pound could weaken sharply again.

      Sri Lanka: Recovery at Risk

      Sri Lanka is rebuilding after its collapse, but its foundation is still fragile. It cannot afford a high oil price scenario. Tourism recovery helps, but not enough to offset energy costs.

      Likely outcomes if oil price spikes:

      • Fuel shortages
      • Higher inflation
      • Renewed currency pressure

      Energy import pressure on FX reserves amplifies problems for an economy still in rehabilitation. This drives oil-driven inflation and currency crisis momentum again. Sri Lanka’s rupee will likely face heavy strain.

      Bangladesh: Quiet Fragility Rising

      Bangladesh once looked structurally strong, but its reserves have weakened. The oil price, climbing toward $120, strains its import bill. Meanwhile, exports face global demand moderation.

      Bangladesh may face:

      • Higher current account deficit
      • Taka depreciation pressure
      • Rising inflation

      Currencies vulnerable to oil shock behave predictably when energy import pressure on FX reserves rises. The taka weakens as oil-driven inflation and currency crisis expectations rise. Bangladesh may not collapse, but depreciation risk remains high.

      Turkey: Policy Fragility Meets Oil Shock

      Turkey imports fuel but has improved its policy stance recently. Yet oil price increases can destabilize its inflation battle. Higher crude means more pressure on the current account and higher domestic price levels.

      Expect:

      • Lira volatility
      • Pressure on central bank credibility
      • Renewed flight to USD and gold

      Energy import pressure on FX reserves hurts Turkey quickly because investors already expect volatility. This fuels oil-driven inflation and currency crisis fears among locals and foreigners.

      Which Countries Actually Benefit from High Oil Prices?

      Not everyone suffers. Some currencies rise when oil prices spike. Exporters flourish, balance sheets strengthen, and government revenues soar.

      Beneficiaries include:

      • Saudi Arabia
      • UAE
      • Kuwait
      • Qatar
      • Norway
      • Canada

      These countries hold large reserves, stable policy frameworks, and benefit from high crude demand. Their currencies strengthen or stay stable. Oil-driven inflation and currency crisis risks do not apply here because they export energy, not import it.

      India: Pressure, Not Panic

      India faces pressure when oil prices soar. It imports most of its crude. However, large reserves, strong remittances, and robust services exports help. The rupee could depreciate, but collapse risk remains low.

      Still, energy import pressure on FX reserves triggers market caution. India may tighten policy or draw on reserves to contain volatility. Traders should watch inflation data and RBI actions. A gradual weakening is possible, but oil-driven inflation and currency crisis fears stay contained due to stronger fundamentals.

      Japan and South Korea: Managed Stress

      Japan and South Korea rely on imported oil too. Yet they have deep reserves, developed financial systems, and strong export industries. Their currencies can weaken in high oil periods but do not collapse.

      However, energy import pressure on FX reserves should still be tracked. Especially for Japan, rising oil price complicates monetary policy. Yet oil-driven inflation and currency crisis fears remain minimal due to credibility and financing capability.

      How Traders Position in a $120 Oil World

      If the oil price breaks toward $120, smart traders position early. They watch currency pairs that historically react to energy shocks. They monitor CDS spreads, reserves, and inflation data.

      Potential strategy themes:

      • Long commodity exporters like CAD or NOK
      • Short, fragile importers like PKR or EGP
      • Monitor Asian FX like INR, THB, and PHP for moderate declines
      • Consider gold as a hedge if the crisis spreads

      Moreover, oil-driven inflation and currency crisis narratives often create momentum trades. Traders buy strength and sell weakness. Risk managers hedge energy import pressure on FX reserves exposure through commodity or currency hedges.

      Final Thoughts: Oil Price Shock Creates FX Battlefield

      A $120 oil price is not a simple commodities event. It is a stress test for economies. It reveals who built defenses and who ignored vulnerabilities. Emerging markets buckle first, and currencies vulnerable to oil shock fall hardest. Energy import pressure on FX reserves triggers emergency measures, while oil-driven inflation and currency crisis expectations spread quickly.

      In this environment, countries with strong policy, high reserves, and diversified exports survive. Those without crumble.

      Ultimately, the world learns the same lesson every cycle: oil price shocks do not create currency instability. They expose it.

      Click here to read our latest article Global GDP Growth 2025: Why the World Economy Is Slowing?

    2. Crude Oil Soars to New Heights 

      Crude Oil Soars to New Heights 

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      • Crude oil prices rise as supply and demand variables clash;
      • Supply concerns persist as OPEC+ fails to produce; and 
      • Energy demand rises as the northern winter approaches. Will WTI continue to rise? 
      • Crude oil extended its gains from last week in Asian trade on Monday. With storms building in the northern hemisphere, geopolitical worries, supply limits, and option hedging all in play, the energy commodity looks to have few options for the time being. 
      • Tensions near the Ukraine-Russia border continue to grow as Moscow sends additional troops to the region. A dispute in this region threatens European energy sources and has heightened global oil supply concerns.
      • The Pentagon has declassified a number of military intelligence records revealing the development of armaments. They have also alluded to a misinformation campaign within Ukraine that they claim was sponsored by Russia. 
      • In recent weeks, a number of analysts and journalists have predicted that oil prices will rise over $100 per barrel. With OPEC+ failing to deliver on its recent output hikes in full, their projections are approaching. 
      • OPEC+ is expected to meet on Wednesday to discuss output objectives. 
      • Above $90 bbl, option underwriters may begin to hedge their risk. According to Bloomberg statistics, the number of calls issued substantially outnumbers the number of puts over $90 bbl.
      • As the price of oil rises, more people will buy it. Once the price has passed through certain criteria and the options have been hedged, if the price falls, the hedging of these options will cause those same purchasers to sell. This might raise the price much more.

      Crude oil technical analysis

      On Friday, WTI crude oil reached its highest level since October 2014. 

      The upward movement has bumped up against the Bollinger Band based on the 21-day simple moving average (SMA), but it has been unable to close outside of the upper band. This might imply that the market is satisfied with the rate of change in the rally. 

      On the upside, resistance might be found at the most recent prior high of 88.84. 

      The 10-day simple moving average (SMA) is trading slightly above a previous pivot point at 85.90, suggesting that it may provide support. 

      Previous lows and pivot points of 81.90, 79.33, 77.44, 74.96, 74.76, and 73.34 may also be useful.

    3. Silver’s New Paradigm Shift Is Taking Shape

      Silver’s New Paradigm Shift Is Taking Shape

      #edgeforex #trading #market #stocks #money #forex #trader #forex #interest #rates #bond #rising #rates #crude #oil #stockmarket #bitcoin crude

      Fundamentals

      The 30-Year Bond interest rate is rising to 2.162 percent, an increase of more than 2%. The 10-Year Note is now trading at 1.859, up 4.9 percent. Interest rates are rising, especially at the low end of the market. The 10-Year Note is inverted, which means that short-term interest rates are rising faster than long-term interest rates. 

      Chairman Powell is talking about tapering and says the Fed would consider interest rate rises in the future to combat inflation. The Dow Jones is down 500 points, the Nasdaq is down 264 points, and the S&P is down, indicating that an increase in interest rates is bad for the markets.

      “Higher interest rates, or the prospect of them, will dampen the economy.” 

      Brent crude oil is now trading at $87 per barrel. WTI is now trading at $84.50. These costs are a stumbling block for the economy. 

      It appears more likely that if interest rates rise, it will be done only once, maybe by 25 basis points. The Fed will most likely do the bare minimum to demonstrate its control over the economy, but we already know what the markets will do if interest rates increase.

      Already, the markets are on the verge of another meltdown. The Fed does not want the stock market to have a significant correction, therefore it will proceed with caution when raising interest rates. 

      When you combine the Omicron factor with China’s lockdown, it adds another drag to the economy. Russia’s threats against Ukraine, as well as escalating tensions with the United States and Western Europe (NATO), only contribute to the world’s economic uncertainties. Russia looks to be preparing an invasion of Ukraine. This might be another black swan occurrence that disrupts the energy markets, which is why crude oil is nearing $90 per barrel. If the Ukraine issue worsens, petroleum may quickly reach more than $95 per barrel.

      A confluence of variables is challenging the foundation of supply everywhere. The price of gold and silver might skyrocket. Silver is the canary in the coal mine, and it will most likely go first. Silver is the world’s most undervalued asset. It is evident that the Fed does not have control over inflation, and it is unknown whether this inflation will be transitory or long-term. It is extremely difficult to cut prices once they have been raised. There is a great deal of ambiguity in many areas. 

      We appear to be in a period of transition and transformation to a new economic system or level. It looks to be heading towards Bitcoin and digital currency.

      It appears that it is just a matter of time until central banks begin to create some type of digital currency. A critical question is whether any digital currency will be supported by anything other than government promises, or if one or more will be backed by gold or a basket of precious metals. China has already taken the lead in digital money, employing an internal digital Yuan. There are numerous uncertainties regarding whether visitors will be able to use it and if they will be able to use it outside of China, but it is evident that China’s central bank is ahead of the game. All they have to say is that it is gold-backed, and they will be well ahead of any other monetary unit.

      Silver

      We’ve been long silver since it reached $22.81. Silver is breaking out, closing at $23.47, up approximately 55 cents or 2.29 percent. This morning, silver had a significant reversal. Rising interest rates are not a negative for precious metals. The Fed hiked interest rates in December 2016, and gold reached $1517 by July. We have been in a decline since August 2020, but we have now reached a significant low. This is only the start of a massive rebound that will take the price back to the prior highs around $30. Silver is a difficult metal to trade. It’s been difficult if you’ve been holding silver since March 2020. However, we are on the approach of a significant advancement.

      As interest rates rise, the precious metals markets will reach a bottom. Silver has broken over the daily VC PMI levels and is now its route to the weekly objective of $23.99. 

      Gold is on the rise. We purchased a contract for $1815.20 right before the market opened today. Based on our Variable Changing Price Momentum Indicator, we encouraged all of our traders to take the daily Buy 1 signal at $1813. (VC PMI). Gold reached its initial goal of $1818 before retreating. Gold has triggered a buy trigger, thus we propose adding additional contracts.

      Gold

      Both gold and silver are on the verge of a significant rise. If gold breaks beyond $1874, the next high would be around $1920. If gold rises over that level, it will challenge $2062. 

      Check out our Marketplace service, Mean Reversion Trading, to discover more about how the VC PMI works and to receive weekly data on the E-mini, gold, and silver.