Oil Swings Between Gains And Losses Ahead Of OPEC+ Talks

Oil Video 09.04.20.

Key Negotiations Begin

Oil is having a choppy trading session, waiting for the results of the key OPEC+ meeting. Early reports suggest that both Russia and Saudi Arabia are ready to commit to meaningful production cuts but they want other countries to participate in the deal.

The U.S. believes that its oil production will decline “automatically” so there is no need to get into formal production cut agreements. Russia is not satisfied with this approach since it fears that U.S. shale oil companies will simply increase their market share at the expense of OPEC+ countries.

Russia has indicated that it may cut is oil production by as much as 2 million barrels per day (bpd) if the agreement is reached. However, it is not clear how much time will be required to implement such production cuts.

Previously, Russia has stated that it was difficult for the country to cut oil production due to the nature of deposits and cold climate. Saudi Arabia and U.S. are in better position to quickly adjust their oil production, but all major producers will have to participate in the deal – or there will be no deal at all.

Is The 10 Million Bpd Cut Big Enough To Improve The Supply/Demand Balance?

Russian oil company Rosneft stated that it believed that a 10 million bpd cut would be sufficient enough to rebalance the market. Rosneft estimates that 2020 oil demand will be lower by 5 million – 7 million bpd compared to 2019 levels.

In my opinion, this is an optimistic estimate. At this point, it looks like major countries will start to re-open their economies in May. However, everyone will be afraid of the second wave of the virus since the world economy cannot take another blow.

Thus, virus containment measures will be lifted gradually. In such environment, it’s hard to expect that oil demand will soon return to normal levels. While the equity market appears to be very optimistic despite the negative data, oil is a physical product, and real-life economic activity will ultimately dictate its price.

The economic projects look grim, especially in the near term. PIMCO, which is one of the biggest investment funds, predicted that U.S. GDP could fall by as much as 30% in the second quarter and 5% for the full year.

Similar hits to GDP would be seen all over the world. In this environment, a 10 million bpd cut may not be sufficient enough to balance the market. However, it would be a huge step forward if oil producers overcome their differences and agree to any coordinated action to curb supply.

Silver Price Daily Forecast – Silver Continues Its Upside Move

Silver Video 09.04.20.

Weaker Dollar And Optimistic Equity Markets Help Silver Gain More Ground

Silver continues its previous upside trend following the release of U.S. Initial Jobless Claims, which showed that 6.6 million of Americans filed for unemployment benefits.

The U.S. stock market was swinging between gains and losses on the news, but so far showed no signs of panic due to the grim data.

The U.S. dollar is losing ground against a broad basket of currencies, and the U.S. Dollar Index has slipped below the psychologically important 100 level. The U.S. dollar weakness is bullish for silver since it makes it more affordable for buyers who have other currencies.

The situation with coronavirus stabilizes, and European countries have already started to work on plans regarding how to reopen their economies. Obviously, the current virus containment measures will be lifted gradually since no one wants to risk provoking a second wave of infection.

However, the talk about reopening the economy after weeks of never-ending bad news is already sufficient enough to encourage investors.

Gold is showing upside, and it looks like the stage may be set for another leg up in the precious metal markets. A combination of positive equity market performance and weaker U.S. dollar is exactly what silver needs to have more upside in the current market environment.

Technical Analysis

silver april 9 2020

Silver prices have settled firmly above the 20 EMA at $14.75 and continue their current upside trend. Silver has previously received support just above the 20 EMA at $14.85. This level has been tested three times, and each time silver saw increased buying activity.

Thus, the $14.75 – $14.85 area is the first major support level for silver. I’d also expect that it won’t be easy for silver to go through the $14.30 – $14.60 area in case it breaches the first material support level.

On the upside, the next material resistance is at 50 EMA at $15.60. This level is close to the recent top which was reached a few days ago. In case silver is able to get above the 50 EMA level and settle there, it will have a very good chance to get back to pre-crisis levels at $16.50 and complete the current rebound.

U.S. Stocks Mixed After Initial Jobless Claims Release

U.S. Initial Jobless Claims Show Major Increase In Unemployment

U.S. Initial Jobless Claims release showed that 6.6 million Americans filed for unemployment benefits. Last week’s number was revised from 6.6 million to 6.9 million. The analyst concensus called for an increase of 5.25 million but estimates varied widely.

In the past three weeks, almost 16 million Americans filed for unemployment benefits. The economy is losing jobs at an unprecedented pace, but it remains to be seen whether the market will react negatively to the news since previous reports were also dismal but did not prevent stocks from showing upside.

World Leaders Start To Think About Reopening Economies

According to data from Johns Hopkins University, there are 432,438 coronavirus cases in the U.S., 152,446 cases in Spain, 139,422 cases in Italy and 113,296 cases in Germany.

While the total numbers are big, the pace of contagion is slowing down, especially in Europe, which entered the crisis earlier than U.S. In this light, it’s not surprising that governments start to prepare their early plans on how to reopen economies that received a mighty blow from virus containment measures.

Germany stated that a gradual return to normal life was possible if the current trend continued and that the country will look at the situation after the Easter holidays.

As per Italy’s Prime Minister Giuseppe Conte, the country may gradually lift existing restrictions by the end of April. The U.S. President Donald Trump is optimistic as usual and wants to see the U.S. economy reopen with a ‘big bang’. However, it’s still too early to tell when this will happen.

OPEC+ Talks Begin

Oil is experiencing a choppy trading session as traders and investors try to guess whether oil producing countries will reach consensus today. A lot is at stake since coronavirus dealt a heavy blow to oil demand and the world may run out of oil storage in a few months if no production cut measures are implemented.

The results of the talks could have a material impact on general market dynamics since oil stocks are guaranteed to be highly sensitive to oil price movements today.

GBP/USD Daily Forecast – U.S. Initial Jobless Claims Are In Spotlight Again

GBP/USD Video 09.04.20.

Waiting For The Key Economic Release Of The Week

GBP/USD remains above the 20 EMA level as the market is encouraged by early signs that the coronavirus pandemic is under control and turns its attention to riskier assets.

However, the U.S. dollar is still holding its ground against the broad basket of currencies, and the U.S. Dollar Index is above the psychologically important 100 level.

The condition of UK Prime Minister Boris Johnson, who fights against coronavirus in a hospital, has improved. Boris Johnson is still in intensive care but is able to sit on the bed and talk to medical staff.

Previously, the condition of the Prime Minister did not have material impact on the strength of the British pound. Now that his condition has improved, traders should not expect any influence on GBP/USD.

Several economic releases have already been published in the UK. Construction Output , Industrial Production and Manufacturing Production showed declines year-over-year.

Construction Output declined by 2.7%, Industrial Production declined by 2.8%, while Manufacturing Production took a hit of 3.9%. Investors and traders should note that this is data for February. When the data for March is released, it will look much worse.

The key economic release of the day is the U.S. Initial Jobless Claims. The previous release showed that 6.6 million Americans filed for unemployment benefits.

This week’s release is also expected to show a massive increase in unemployment. The current consensus is that 5.25 million applications were filed, but estimates wary widely.

Previously, markets were able to shrug off negative employment data and focus on first signs of improvements on the coronavirus front. It remains to be seen whether they will be able to withstand the hit from employment data this time.

Technical Analysis

gbp usd april 9 2020

GBP/USD is trading in the range between the 20 EMA at 1.2300 and 50 EMA at 1.2480. The 20 EMA serves as the first material support level for the pair.

If this level is breached to the downside, GBP/USD will likely re-test the recent lows at 1.2170.

The 50 EMA serves as a major resistance level and is located at the local highs which have been tested several times.

If this major level is breached to the upside, GBP/USD will have a good chance to get to pre-crisis levels at 1.2750 and complete the current rebound.

USD/CAD Daily Forecast – Canadian Dollar Gains Ground Amid Risk-On Mode In The Markets

USD/CAD Video 08.04.20.

Stronger Oil And Optimistic Equity Markets Boost Canadian Dollar

USD/CAD continues to stay below the 20 EMA level as optimism in the global markets support riskier assets like the Canadian dollar.

Earlier, the U.S. dollar tried to rebound, and the U.S. Dollar Index is still above the 100 level. However, the comments of Dr. Anthony Fauci, who is the director of the U.S. National Institute of Allergy and Infectious Diseases and a key speaker during the current coronavirus crisis, helped riskier assets.

According to Dr. Fauci, the U.S. health officials are already developing plans on how the country will return to normal life in case the virus containment measures prove to be effective.

No exact steps are expected at this time, and current social distancing measures will be continued, but the U.S. needs a plan on how to re-open the economy since each day spent in a lockdown puts pressure on the economy.

Another catalyst playing in favor of the Canadian dollar today is the strength on the oil price front. Oil is gaining ground ahead of the OPEC+ meeting despite the increase in oil inventories.

Oil production is an important part of the Canadian economy so oil price strength often translates into the Canadian dollar strength.

While speculative traders could make some bets on oil ahead of the meeting and cause volatility in USD/CAD, the real action will take place tomorrow when the results of the OPEC+ meeting will be made public.

Technical Analysis

usd cad april 8 2020

USD/CAD has breached the 20 EMA level and continues its downside move. The next support for the pair is located near the recent lows at 1.3925. USD/CAD has already made an attempt to test this level but received material buyer support near 1.3950.

If the support at 1.3925 is breached to the downside, the next support level for the pair is located at the 50 EMA at 1.3850. This move would be possible if oil prices rally in case of a good oil production cut deal.

On the upside, the nearest resistance is at 20 EMA at 1.4085. In case this level is breached to the upside, the pair could head towards the next material resistance near the 1.4250 level.

Oil Is Up Ahead Of OPEC+ Meeting Despite Increase In Inventories

Oil Video 08.04.20.

Oil Inventories Increase Further

Oil had a choppy trading session today as traders prepared themselves for OPEC+ meeting which is scheduled for April 9, 2020.

Previous days were full of media reports that described positions of various oil producers ahead of the meeting. Today, the media is mostly silent so we can assume that the period of “bargaining through media” is over and the oil market players are finalizing their true negotiating positions ahead of the meeting.

Yesterday, API Crude Oil Stock Change data showed an increase in oil inventories of 11.9 million barrels. Today, the EIA Petroleum Inventories showed an increase of 15.2 million barrels. It is not surprising that inventories continue to increase as demand is under pressure from virus containment measures.

Importantly, the EIA report indicated a decrease in oil production. Saudi Arabia and Russia have indicated that they want to see U.S. cutting its oil production, or no production cut deal would be reached.

The U.S. has problems with a coordinated production cut since oil is produced by many independent companies while anti-trust laws make it hard to cooperate in order to boost oil prices.

If the U.S. production falls “automatically”, the U.S. side can use it as an argument that the country also participates in production cuts.

EIA Expects WTI oil at $29 in 2020

The U.S. Energy Information Administration has recently published its short-term energy outlook in which it stated that it expected that Brent oil prices would average $33 per barrel in 2020, while WTI oil prices would average $29 per barrel.

The previous forecast was decreased by $10 as the hit to oil demand was bigger than expected.

The recent high for WTI oil was near the $29 level, and it remains to be seen whether an oil production cut deal could help oil prices gain a foothold above this level.

At this point, it looks like the destruction of oil demand caused by virus containment measures will lead to sustained pressure on oil prices in the coming months even if a production cut deal is reached.

In this light, EIA projections seem realistic as high inventories will continue to impact oil market even when the situation with supply/demand balance gets better.

 

Silver Price Daily Forecast – The Current Upside Trend Remains Intact

Silver Video 08.04.20

Silver Holds Above $15.00 As Markets Believe That Virus Containment Measures Are Working

Silver continues its upside move after it breached the 20 EMA level several days ago. Equity markets remain optimistic which also helps precious metals in the current market environment.

The U.S. Dollar Index has corrected to the 100 level but does not experience additional downside despite the positive dynamics in riskier assets. Meanwhile, gold continues its attempts to get above the $1700 level, but so far these attempts have been futile.

I maintain my conviction that the whole precious metal segment will get a boost if gold manages to settle above $1700 as such a move will lead to an influx of additional money into the whole sector.

At this point, it is unclear which additional catalysts are necessary for precious metal upside.

On the one hand, another leg down in equity market will lead to increased safe haven buying. However, it remains to be seen whether precious metals will serve as safe haven assets in this scenario.

During the early stage of the current crisis, only the U.S. dollar and the U.S. Treasuries were seen as bullet-proof safe haven assets, while other asset classes often experienced downside on negative economic or healthcare news.

On the other hand, U.S. dollar weakness could be of great help for silver and other precious metals. Such a scenario demands continued improvements in investor confidence, which could come from stabilization on the virus front or from new economic stimulus.

Technical Analysis

silver april 8 2020

Silver stays above the 20 EMA and continues its upside trend. The nearest resistance is located at the 50 EMA level at $15.70. Silver has already made an attempt to get there, but this attempt was stopped at $15.50.

This was a very fast move, so silver had little chance to get above $15.70 without first settling below the resistance level. If the 50 EMA level is breached to the upside, silver will be able to get to pre-crisis levels at $16.50 and complete the rebound.

The nearest support for silver is at the 20 EMA level at $14.70. In case silver prices fall below this support level, silver will find itself back in the $13.80 – $14.70 range, although I’d expect some additional support in the $14.30 – $14.60 area.

U.S. Stocks Set To Open Higher As Investors Hope That The Upside Trend Will Continue

The Absence Of Economic Data Helps The Market Gain More Ground

S&P 500 futures are gaining about 1% in premarket trading as investors hope that the situation with coronavirus is stabilizing.

Importantly, the first half of this week was light on the economic data side, so the market has not been tested by negative news.

This situation will change tomorrow as the U.S. Initial Jobless Claims data will be released. The previous release indicated that 6.6 million of Americans applied for unemployment benefits, while the analyst consensus for this week’s released calls for 5.25 million Initial Jobless Claims.

Previously, the market was able to shrug off the negative employment data, but it will be more difficult to do this time since the market is at higher levels.

Oil Stocks May Experience Big Moves Ahead Of OPEC+ Meeting

Oil price dynamics could play a role in today’s trading since an ultra-important meeting of OPEC+ countries is scheduled for April 9, and traders may start placing their speculative bets today.

If any big moves in oil occur, oil stocks will surely follow, impacting general market dynamics.

As usual, the major oil producers like Exxon Mobil or Chevron are in spotlight. So far, their shares have shown better dynamics than oil prices during the current crisis, but it remains to be seen whether they will be able to withstand another leg down in oil if it happens.

Europe Fails To Reach Consensus On Economic Aid Plan

EU finance ministers have spent all night on negotiations about European support for the struggling economies. Discussions were put on hold until Thursday.

Hard-hit Italy and Spain argue that European “coronabonds” should be issued, while countries like Germany and Netherlands are against mutualization of debt.

The global economy is very connected nowadays, so a coordinated action from all major countries is necessary to reduce the damage from virus containment measures.

So far, governments and central banks provided the markets with sufficient liqudity, but even the unprecedented measures won’t be sufficient enough to support the world economy after the acute phase of the crisis.

At this point, the equity markets are optimistic that appropriate solutions will be found, and the companies will get enough support to get through virus-induced crisis.

If this confidence evaporates, we’ll see another leg down in U.S. equities.

GBP/USD Daily Forecast – U.S. Dollar Gains Ground As Attention Turns To Economic Woes

GBP/USD Video 08.04.20.

U.S. Dollar Is Showing Strength As Previous Optimism Fades

GBP/USD continues to trade near the 20 EMA level as the market is trying to assess coronavirus-related risks.

Yesterday, the British pound gained ground against the U.S. dollar amid general optimism in the markets. As investors turned to riskier assets, the U.S. dollar was losing ground against a broad basket of currencies, and the U.S. Dollar Index fell below 100.

However, global markets are once again turning their attention to the negative consequences of virus containment measures, and the U.S. Dollar Index has managed to get above 100.

Data from Johns Hopkins University shows that there are 399,886 coronavirus cases in the U.S. and 55,949 cases in the UK. While the pace of new infections has moderated, there’s still a lot of work to do, and it’s hard to expect that virus containment measures will be lifted soon.

Meanwhile, British Prime Minister Boris Johnson, who has coronavirus, has spent his second night in intensive care. As per the comments of Foreign Secretary Dominic Raab, Johnson was receiving oxygen support but his condition was stable.

So far, the condition of the Prime Minister had no material impact on GBP/USD trading, and I expect that it won’t have any impact in the future unless his condition seriously worsens.

No material economic releases are expected today, but U.S. FOMC Minutes will be released. Market participants will digest additional information on how the U.S. Federal Reserve decided to cut rates and which policy measures were on the table.

Technical Analysis

gbp usd april 8 2020

GBP/USD continues to trade near the 20 EMA level. The pair has tested the first resistance level at 1.2385 but failed to get higher and pulled back.

If the resistance level at 1.2385 is breached to the upside, GBP/USD will have a chance to test the major resistance level near the 50 EMA at 1.2480.

However, GBP/USD will first need to stay above the 20 EMA level, as falling below this level will increase chances of a test of the next support level at 1.2170.

At this point, GBP/USD continues to trade in a local downside channel. This downside trend remained intact despite the recent attempts of the British pound to gain ground.

USD/CAD Daily Forecast – Canadian Dollar Gains Ground On Global Market Optimism

USD/CAD Video 07.04.20.

USD/CAD Moves Lower Amid Broad U.S. Dollar Weakness

USD/CAD breached the 20 EMA level and continues the downside move amid general U.S. dollar weakness against a broad basket of currencies.

The U.S. Dollar Index fell below the 100 level as global markets showed optimism about progress on the virus containment front.

The coronavirus situation remains tense, with as much as 369,069 cases recorded in the U.S., according to the data from Johns Hopkins University. However, it looks like the situation is stabilizing in Spain and Italy, while the hardest-hit U.S. states also show signs of progress.

In current conditions, this is enough for the global markets to have material upside, leading to  weakness of the U.S. dollar which serves as a safe haven asset of last resort.

There were no notable economic releases today which also provided support for the Canadian dollar as bad news are typically bullish for the U.S. dollar in the current environment.

Oil is mostly flat as the market waits for the upcoming negotiations about a major oil production cut, which are set to take place on April 9, 2020.

This date will be very important for USD/CAD since oil price dynamics is a major catalyst for the Canadian dollar, and oil will likely make a big move depending on whether oil production cut negotiations are successful or not.

Technical Analysis

usd cad april 7 2020

USD/CAD breached the low end of the local upside channel to the downside and continues to move lower. In addition, USD/CAD settled below the support level at 20 EMA near 1.4100.

The pair almost reached the next support level near the recent lows at 1.3925. Currently, the combination of downside technical catalysts looks strong enough, an a test of this level may be coming soon.

If the support level at 1.3925 is breached to the downside, USD/CAD will have a chance to get to the next support level at the 50 EMA at 1.3830. The pair will likely need additional broader weakness in the U.S. dollar to make this move.

On the upside, the previous support at 20 EMA became the new resistance level. If this level is breached to the upside, USD/CAD will get back to the previous trading range between 1.4100 and 1.4250.

Oil Swings Between Gains And Losses Amid Uncertainty Over Production Cut Deal

Oil Video 07.04.2020

Most Likely, U.S. Will Have To Participate In The Production Cut Deal

The key topic of this week is the negotiations about the oil production cut deal. Previously, oil prices surged on hopes that major oil producers would cut production by 10 million barels per day (bpd) but then pulled back when the meeting of OPEC+ countries was postponed from April 6, 2020 to April 9, 2020.

According to various media reports, Saudi Arabia, Russia and other OPEC+ members want the U.S. to cut oil production as well. In addition, countries like Canada and Brazil will most likely have to participate in the deal.

It remains to be seen whether the U.S. will join the production cut deal. Previously, the U.S. signaled that it was ready to impose tariffs on foreign oil if the oil production cut deal did not work out.

U.S. President Donald Trump has recently mentioned that oil production cuts in the U.S. were happening automatically because of low prices but did not elaborate on whether the country was ready to participate in a coordinated action to improve supply/demand balance.

It looks like both Saudi Arabia and Russia are serious about demanding production cuts from U.S as there is zero sense for leading oil producers to cut production if U.S. oil companies do not participate in the deal but profit from improved oil prices.

Saudi Arabia And Russia Try To Determine From Which Level To Cut Production

Russia did not increase its oil production in April because the market was already awash in oil. At the same time, Saudi Arabia followed a different strategy, and increased its oil production levels to gain market share.

Now, both countries are debating whether any upcoming production cut should be based on average first-quarter production levels or on current production levels. Of course, Saudi Arabia wants to cut its oil production from current levels since it has materially increased its oil production right after the previous OPEC+ deal ended at the end of March.

This is another obstacle on the way to an oil production deal. I believe that other countries would not tolerate Saudi Arabia’s plan to base its oil production cuts on current production levels. We’ll see whether Saudi Arabia is serious about this plan, especially given the fact that the U.S. is its important ally. For now, Saudi Arabia’s desire to keep as much oil production as it can serves as a bearish near-term catalyst for oil.

Silver Price Daily Forecast – Silver Heads Towards The Next Resistance Level

Silver Video 07.04.20.

Silver Heads Towards The 50 EMA

As I wrote yesterday, the breach of the key 20 EMA level was setting the scene for rapid upside momentum in silver. This is exactly what happened in practice since silver prices enjoyed fast upside soon after the 20 EMA was breached.

This upside move coincided with a major move in the equity markets and positive price action on the gold price front. The equity markets remain optimistic about stabilization on the virus front, while gold continues its efforts to settle above $1700.

In my opinion, gold’s upside is an important catalyst for the potential silver upside. If gold is able to gain ground above $1700 per ounce, more money will flow into the precious metal sector, which will benefit silver.

Meanwhile, the U.S. dollar is showing weakness due to optimism in the markets, and the U.S. Dollar Index is back below the psychologically important 100 level.

The U.S. dollar continues to serve as safe haven asset of last resort while the precious metal sector is periodically vulnerable to negative economic and healthcare data.

To continue the upside move, silver will likely require additional positive data on the healthcare front (investors should not expect any positive economic data in April as all economies are under heavy pressure from virus containment measures).

It remains to be seen how long the current optimism in the equity markets will continue since S&P 500 has already recovered from 2200 to levels above 2700.

The back end of this week is more data-heavy, and the markets will have to digest another U.S. Initial Jobless Claims report, which could create downside risks for many asset classes.

Technical Analysis

silver april 7 2020

Silver broke through the 20 EMA and is heading towards the 50 EMA at $15.70. The 50 EMA level is the first major resistance level on silver’s way up. If silver manages to get past the 50 EMA, it will have a good chance to return to pre-crisis levels at $16.50.

The 20 EMA, which has previously served as resistance for silver, has become an important support level. Those traders who have missed the move would likely try to get into positions near $14.70 if such a chance presents itself.

In case silver drops below $14.70 and stays there, it will find itself back inside a trading range between $13.80 and $14.70.

U.S. Stocks Set To Continue Their Winning Streak

Early Signs Of Stabilization On The Virus Front Lead To Continuation Of The Rally

S&P 500 futures are pointing to a 3% gain in premarket trading following yesterday’s big upside move. The reason for the optimism is the same – the market hopes that the coronavirus situation will soon stabilize, and investors will be able to evaluate when the major economies will lift virus containment measures.

Currently, there are four countries that have more than 100,000 coronavirus cases – U.S., Spain, Italy and Germany, while France will likely join this list very soon. However, the pace of new infections is slowing down, which provides investors with hope that the situation is finally under control.

More Stimulus Measures Are Announced

While there are signs of stabilization on the virus front, the situation on the economic front will continue to worsen in the upcoming weeks.

EU finance ministers discuss a 500 billion euro aid package to facilitate recovery after the pandemic is over. Italy is ready to spend as much as necessary to help the economy get out of the current crisis.

In Japan, an almost $1 trillion stimulus package has been approved after the country declared coronavirus emergency. Currently, Japan has 3,906 coronavirus cases, according to data from Johns Hopkins University.

However, the population of Japan has a significant percentage of older people, so coronavirus presents an especially challenging problem for the country.

Japanese economy has been in poor shape even before the coronavirus crisis, and I doubt that even a $1 trillion package will help much, but the additional liquidity will certainly play a positive role for the world markets.

Uncertainty Over Oil Production Cut Deal Remains

Oil prices are flat today after major volatility in recent trading sessions as the market tries to evaluate whether major oil producers can reach a common ground and negotiate a realistic oil production cut deal.

At this point, it looks like Russia and Saudi Arabia want the U.S. to join the deal, which is a tough task. In case the production cut deal is reached, oil prices and oil stocks will get a boost, helping the market get to new local highs despite the worsening situation in the economy.

GBP/USD Daily Forecast – British Pound Continues Its Attempts To Rebound

GBP/USD Video 07.04.20

UK PM Boris Johnson Is Taken To Intensive Care Unit Due To Worsening Coronavirus Symptoms

Yesterday, GBP/USD was trying to get back above the 20 EMA level but this attempt failed. Today, the pair continues its attempts to get above 1.2300 after briefly visiting the sub-1.2200 territory.

UK Prime Minister Boris Johnson, who was previously taken to hospital after ten days of suffering from coronavirus symptoms, was transferred to an intensive care unit.

While the leader’s health is important for a nation’s currency at times of unprecedented turmoil, Boris Johnson’s condition has not had any meaningful impact on the British pound.

Meanwhile, the U.S. dollar is losing ground against a broad basket of currencies after the U.S. Dollar Index failed to get through the 101 resistance level.

Yesterday, the equity markets showed great optimism on hopes that the virus would soon be contained, and the S&P 500 index was up as much as 7%.

The risk-on mode in the markets is typically bearish for the U.S. dollar which serves as the save haven asset of last resort. However, the U.S. dollar showed some strength despite the major upside move in the markets.

It remains to be seen whether the U.S. dollar can continue to show strength if the current equity market rally continues, as the early futures trading suggests.

Technical Analysis

gbp usd april 7 2020

GBP/USD continues its attempts to get back above the 20 EMA level. Yesterday, the pair spent some time above 1.2300 and even got close to 1.2330, but failed to hold above 1.2300 and fell towards 1.2200.

Today, the attempt to get a foothold above 1.2300 level is supported by the weakness of the U.S. dollar against a broad basket of currencies amid general optimism in the market.

If GBP/USD manages to stay above the 20 EMA, the next resistance level is located at 1.2330. If this level is breached to the upside, the pair will have a good chance to return to the upside trend and test the major resistance at 50 EMA at 1.2480.

On the downside, the recent lows near 1.2170 serve as the first material support for GBP/USD. If this support is breached to the downside, the pair would move towards the next support level at 1.2000.

U.S. Stocks To Watch This Week

The Earnings Season Begins

The first quarter earnings season is set to begin this week. No major companies will report their earnings but there are several interesting reports that may help traders and investors evaluate the potential results of the bigger players.

Levi Strauss will provide its earnings report on April 7 after the market close. The fashion industry is hit hard by the current coronavirus crisis as consumers lose jobs and sit at home, so it is very interesting to see how the beginning of virus containment measures impacted the financial results of the company.

PriceSmart will provide its earnings report on April 8 after the market close. PriceSmart operates membership shopping warhouse clubs in Central America, Colombia and the Carribean, so its results are not necessarily indicative of what the U.S. retailers would report. However, the shopping fever boosted by virus containment measures was seen all over the world, so investors in Costco should certainly take notice of PriceSmart’s results.

Airlines Continue To Struggle

Airlines have been hit hard during the current crisis as air travel almost stopped completely in many parts of the world. While airline stocks have lost a lot of ground, they could still have more room to fall in case the situation continues to deteriorate.

Delta Airlines, which expects a 90% decline in second-quarter revenues, still has a $14.5 billion market capitalization after losing 60% of stock value since the beginning of the year.

Southwest Airlines is down roughly 45% year-to-date and has a $16.3 billion market capitalization. Clearly, the current valuation implies that things will get better for the airline industry in a reasonable timeframe.

The stocks of other companies like United Airlines or Spirit Airlines got an even bigger hit since they are more leveraged. These stocks will be very volatile in the upcoming weeks since they need a timely resolution of the current crisis.

Boeing In Spotlight After Major Moves

March was very eventful for Boeing shares after the stock dropped from $280 to below $100 and then rebounded to $180, only to fall again in early April.

The company’s previous problems with MAX aircraft were intensified by the current problems of airlines whose planes do not fly, and who will not need additional planes from Boeing in the near-to-medium turn.

The stock is set to have plenty of volatility this week as investors and traders will try to guess when Boeing’s clients, airlines, will have the resources to take Boeing’s production.

Oil Prices Fall As OPEC+ Meeting Is Delayed

Oil Video 06.04.20

April 9, 2020 Is Now The Key Date For The Oil Market

Oil is in the pullback mode as OPEC+ meeting was postponed from Monday to Thursday. Previously, oil rallied on hopes that Russia, Saudi Arabia and other oil producers will be able to work out a deal to cut oil production by 10 million barrels per day (bpd).

Russia has indicated that it was ready to participate in the oil production cut deal. Kirill Dmitriev, the head of the Russian Direct Investment Fund and one of Russia’s top oil negotiators, stated that Saudi Arabia and Russia were very close to the deal.

At this point, it is not clear whether the U.S. will participate in the deal. Previously, U.S. President Donald Trump stated that he could impose very sustantial tariffs on foreign oil if there is no production cut deal.

The problem is that Russia and Saudi Arabia have no interest in bailing out U.S. shale companies which need much higher oil prices to survive in the longer term.

Currently, some of these companies are protected by their hedging programs, but their survival will be at risk if oil prices do not increase meaningfully in 2020. Also, not every oil producer has the technological opportunity to adjust oil production at short notice without doing damage to future production.

Near-Term Impact On Oil Demand Is Still Unknown

Obviously, the second quarter will be the most challenging in terms of supply/demand balance. However, estimates of the imbalance wary widely, and it’s very hard to forecast the actual situation since analysts do not know when virus containment measures will be lifted in major economies.

In this situation, world oil storage will continue to be flooded with oil even in the case of a 10 million bpd production cut. The 15 million bpd production cut would have been better, but I do not think that it’s possible given the continued disagreements between major oil producers.

In my opinion, the only scenario when the world oil production could be cut by 15 million bpd is the scenario of forced production cuts for those producers whose costs are too high or who run out of available storage for their oil.

However, even a 10 million bpd production cut would be a major step forward for the beaten oil market. Hopefully, OPEC+ will announce a deal on April 9, 2020.

 

Silver Price Daily Forecast – Silver Tries To Break Through Major Resistance Level

Silver Video 06.04.20

Silver Gains Ground Despite Stronger U.S. Dollar As Optimism Is Widespread

Despite the continued strength of the U.S. dollar, silver is trying to get through the major resistance near the 20 EMA in the $14.50 – $14.70 area.

The U.S. Dollar Index continues its upside move and is currently trying to get through the 101 level, highlighting the strength of the American currency against a broad basket of currencies.

At the same time, the optimism in the markets helps silver to gain some ground. In addition, gold is enjoying upside as well, which is another bullish catalyst for silver.

The market is optimistic on hopes that the situation with coronavirus will stabilize soon, and that governments will start lifting virus containment measures which are hurting the economy.

Today, we see an interesting situation when stocks, precious metals and the U.S. dollar are enjoying upside at the same time. Such moves highlight the nervous nature of today’s markets.

Continued upside in equity markets will likely be bullish for silver which has received less investor support than safe haven assets like the U.S. dollar and gold. However, the situation remains very fluid, and coronavirus numbers could still get worse, especially in the U.S.

Gold could soon be trying to get through the key $1700 resistance level, a test which will also be important for silver. If gold gets to new highs, investors should expect a similar boost to most precious metals since new money will flow into the whole sector.

Technical Analysis

silver april 6 2020

Silver is currently trying to settle above the key 20 EMA level but faces material resistance in the $14.50 – $14.70 area.

To continue the current upside trend, silver will have to get above $14.70 so that it can get more momentum from new entries as well as from unfortunate short-sellers who bet on silver downside near local highs.

If silver manages to settle above $14.70, the road to 50 EMA at $15.70 will be open. In case silver fails to get above the resistance level in the coming days, bear activity may intensify, and another test of the major support level in the $13.80 – $14.00 area is likely.

If such a test is successful, the upside trend will be over, and silver will quickly get to the next support level at $13.30.

U.S. Stocks Set To Open Higher On Hopes Of Virus Stabilization

Virus Data Gets Better In Europe While New York Sees Some Light At The End Of The Tunnel

S&P 500 futures are gaining more than 3% in premarket trading as investors express optimism that the situation on the coronavirus front will start to stabilize.

According to data from Johns Hopkins University, there are 337,933 coronavirus cases in U.S., 135,032 cases in Spain, 128,948 cases in Italy, 100,132 cases in Germany and 93,780 cases in France.

The situation in Italy and Spain, which are the most hit among European countries, has shown signs of stabilization in recent days. While it’s too early to proclaim victory over the virus, Spain expects to roll out a wider coronavirus test program which should allow it to gradually lift virus containment measures.

In Germany, the government expects to start returning to normal life after April 19, 2020, when the current lockdown measures are scheduled to end. Even Italy, where the virus was especially deadly, sees some light at the end of the tunnel.

In the U.S., New York has finally shown some signs of stabilization but further data is required to confirm the positive trend. Investors got used to the fact that the situation on the virus front got worse day by day so the market is currently gaining ground on hopes that the current nightmare will end in April.

Interestingly, the U.S. dollar, which has served as safe haven asset of last resort, is gaining ground against a broad basket of currencies, so there are investors who do not believe that the worst part of the crisis is over.

Oil Production Cut Deal In The Works

In addition to virus data, the potential oil production cut deal is very important for the near-term direction of the market.

Oil prices have shown great volatility as the meeting between OPEC+ countries got postponed until April 9, 2020 but Russia indicated that the major oil producers were close to a deal.

It remains to be seen whether the U.S. will openly participate in the production cut deal. If the U.S. manages to push Saudi Arabia, Russia and other countries to cut production but does not participate in the deal, the U.S. shale companies will get a free ride, and their stocks will get a boost.

GBP/USD Daily Forecast – British Pound Tries To Rebound After The Pair Falls Below 20 EMA

British PM Johnson Is Taken To Hospital Due To Coronavirus

GBP/USD breached the 20 EMA below 1.2300 but the British pound is showing some signs of strength and tries to gain more ground amid optimism on the coronavirus front.

British Prime Minister Boris Johnson was taken to the hospital with persistent coronavirus symptoms as he has been ill for 10 days. His Downing Street office stated that his admission to the hospital was a precautionary step. The news did not cause any material weakness in the British Pound.

Meanwhile, the U.S. dollar is flat against a broad basket of currencies after the U.S. Dollar Index attempted to get through the 101 level. While the total number of coronavirus cases in the world continues to grow, the market sees some light at the end of the tunnel – S&P 500 futures are currently gaining as much as 4%.

The risk-on mode is typically bearish for the U.S. dollar during the current crisis since the American currency serves as a safe haven asset of last resort. It remains to be seen whether the current upside in the markets would be sustainable as it’s still too early to talk about lifting virus containment measures in developed economies.

According to data from Johns Hopkins University, the U.S. has already accumulated 337,637 coronavirus cases, while the UK has accumulated 48,440 cases. Unemployment data which was released last week showed that the crisis dealt a heavy blow to the economy, so investors and traders should expect that upcoming economic releases would look grim.

Technical Analysis

gbp usd april 6 2020

Currently, the key level for GBP/USD is the 20 EMA below 1.2300. If the pair manages to stay below the 20 EMA, GBP/USD will continue its downside movement.

This scenario will require some U.S. dollar strength against a broad basket of currencies. The current optimism in the markets is a bearish catalyst for the American currency but if the pair stays below the 20 EMA, it will be able to continue moving towards the next major support at 1.2000.

On the upside, the main resistance for GBP/USD is located at 50 EMA below 1.2500. In case this resistance is breached, the pair will have good chances to return to the pre-crisis level at 1.2750.

USD/CAD Daily Forecast – Canadian Dollar Is Supported By Surging Oil Prices

The Canadian Dollar Holds Well Thanks To Oil Price Upside, But The Weekend Factor May Be In Play Once Again

USD/CAD continues to consolidate near the 1.4150 level. U.S. dollar has shown strength against a broad basket of currencies today as the situation on the coronavirus front continued to worsen and investors favored safe haven assets.

The U.S. Dollar Index has recently breached the 100 level and is currently heading towards 101. However, the Canadian dollar is supported by a rally in the oil market, which is boosted by hopes for an oil production cut deal.

An increase in the price of oil will be a positive development for the Canadian economy. The Canadian oil trades at significant discount to WTI oil and has reached single-digit levels during the current crisis, so oil price upside is necessary to improve the situation.

Currently, the problems with coronavirus in the U.S. have not hurt the U.S. dollar, which still serves as the safe haven asset of last resort. On the contrary, the bad news on the economic front have typically led to upside moves in the American currency.

In all likelihood, this pattern will not change in the coming days. I’d also note that safe haven buying may intensify on Friday since market participants may want to reduce exposure to riskier assets.

Technical Analysis

usd cad april 3 2020

USD/CAD continues to consolidate near the 1.4150 level. The 20 EMA, which is currently located at 1.4080, serves as a major support level for the pair. This level has already been tested several times, and each time USD/CAD saw increased buying activity in this area.

In case the 20 EMA is breached to the downside, the pair could quickly move towards the next support level at 1.3925. Fundamentally, a combination of oil price strength and broader U.S. dollar weakness could serve as a catalyst for this move, so traders should watch oil and the U.S. Dollar Index closely.

On the upside, the resistance in the 1.4270 area remains intact. The pair will have to breach this resistance level to have a chance to get to the major resistance level at 1.4330.

I’d note that volatility is starting to decrease in the forex markets so traders should expect that major moves could take more time to develop.