U.S. Stocks Set To Open Higher As Traders Bet On Recovery

The Market Believes That Life Will Soon Get Back To Normal

S&P 500 futures are up about 2% in the premarket trading session as investors and traders are optimistic about the prospects for economic recovery.

Today, S&P 500 will likely test the 3000 level and try to stay above it as market participants bet that the worst is over while hoping that governments and central banks will continue to flood the financial system with money.

European countries are moving to relax travel restrictions ahead of the summer season, so travel stocks may get a boost today. In general, the worst fears were not realized in practice as people in various countries were ready to return to their regular lives, providing support to various businesses in the hard-hit services segment.

Oil Continues Its Upside Move

Oil is back to the upside mode following a temporary pullback on Friday. Oil traders gain confidence about the depth of oil production cuts and believe that transportation demand will recover sooner than previously expected.

The oil rally provides support for many oil-related equities and serves as an important catalyst for additional upside of S&P 500.

That said, oil continues to trade at low levels – the front-month contract for WTI trades near $34 per barrel, while the front-month contract for Brent is at the $36 level.

These price levels put the existence of many higher-cost oil producers at risk, especially among U.S. shale oil companies, and the industry is clearly not out of the woods yet.

Market Optimism Will Get Tested By A New Portion Of Economic Data

The U.S. stock market has successfully shrugged off the bad economic data that was released in recent weeks. However, the market may pay increased attention to economic numbers as stocks rise to new highs.

This week, traders will digest the second estimate of GDP Growth Rate for the first quarter. In addition, the market will evaluate the new Initial Jobless Claims and Durable Goods Orders reports. All these reports are scheduled to be published on Thursday.

The economic data is set to look grim for the upcoming months, but the key question is at what market level it will start to impact the stock price dynamics.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – British Pound Gets A Boost From Increased Risk Appetite

GBP/USD Video 26.05.20.

British Pound Gains Ground Amid Rising Demand For Riskier Currencies

GBP/USD is gaining ground as the continued reopening of the world economy boosts appetite for riskier assets.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has declined from the 100 level towards 99.5.

S&P 500 futures are up almost 2% in premarket trading and look set to test the 3000 level during the regular trading hours, highlighting the increasing risk appetite.

In addition to the general softness of the U.S. dollar, the British pound is supported by the gradulal reopening of the British economy.

On Monday, UK Prime Minister Boris Johnson stated that outdoor markets and car dealers will reopen from June 1 while other non-essential retail will be able to open its doors from June 15.

Today, the U.S. will release New Home Sales data for April. Analysts expect that New Home Sales declined by 21.9% on a month-over-month basis as they were hit by coronavirus-related measures that kept potential buyers at their homes.

Technical Analysis

gbp usd may 26 2020

Yesterday, GBP/USD tried to get below the nearest support level at 1.2170, but the increased appetite for riskier currencies provided material support for the British pound, and the pair is back above 1.2200.

On its way up, GBP/USD will have to deal with the key resistance level at 1.2250. Previously, the rebound from the recent lows at 1.2080 was stopped at 1.2250, and failure to settle above the key resistance level suggested that the downside trend in GBP/USD will continue.

This time, GBP/USD will have another chance to get above 1.2250, supported by global market optimism. If GBP/USD manages to settle above this level, it will likely gain material upside momentum and head towards the next resistance level at the 50 EMA at 1.2350.

On the support side, the nearest stupport is located at 1.2170. In case GBP/USD breaches this level, it will likely fall closer to recent lows at 1.2080.

In case GBP/USD fails to settle above 1.2250 for the second time, sellers will likely increase their activity, and GBP/USD will find itself in a new trading range between the support at 1.2080 and the key resistance at 1.2250.

For a look at all of today’s economic events, check out our economic calendar.

 

USD/CAD Daily Forecast – Stronger Oil Helps The Canadian Dollar

USD/CAD Video 25.05.20.

Quiet Action At The Beginning Of The Week

USD/CAD stays flat as trading activity is low due to Memorial Day holiday while oil holds its ground despite worries about oil demand in the upcoming months.

Oil’s comeback after the sell-off on Friday had a material impact on USD/CAD dynamics, and the pair returned back under 1.4000.

The U.S. dollar is flat against a broad basket of currencies. The U.S. Dollar Index continues to stay in the range between 99 and 101, and a move out of this range will lead to increased momentum in USD/CAD.

I’d note that the U.S. Dollar Index has been range-bound for two months and it will need material catalysts to move out of this range.

Currently, there is a balance between optimism about the reopening of the world economy and worries about the pace of the economic recovery, so the U.S. dollar cannot make a significant move in any direction.

Once this balance is broken, we’ll see more decisive action in USD/CAD.

Technical Analysis

usd cad may 25 2020

The technical picture for USD/CAD is still rather bearish since each attempt to rebound from the major support level at 1.3850 is met at a lower level. This time, the rebound from the support at 1.3850 was met near 1.4050.

This level will serve as the first material resistance level for USD/CAD. In case USD/CAD manages to settle above this level, it will head towards the next resistance at the high of the previous rebound at 1.4150.

A move above 1.4150 will be bullish for USD/CAD since the two previous rebounds were stopped at this level. In this case, traders can count on a test of the major resistance level at 1.4250.

On the support side, USD/CAD will have to deal with the major support level at 1.3850. There are no material support levels between 1.3850 and 1.4000, although some support may be seen closer to 1.3900.

USD/CAD will likely gain major downside momentum in case it settles below 1.3850. In this scenario, it could quickly get to the next support level at 1.3750.

From a big picture point of view, USD/CAD remains range-bound. It will certainly need additional catalysts to get out of the current trading range.

For a look at all of today’s economic events, check out our economic calendar.

 

Oil Holds Its Ground As Upside Trend Remains Intact

Oil Video 25.05.20.

U.S. Drilling Activity Continues To Decline

On Friday, oil was under pressure due to worries about China’s economic growth. However, the pressure was short-lived as oil received support from the weekly Baker Hughes Rig Count report which showed that the number of U.S. drilling rigs declined by 21 to 318. In comparison, the U.S. had 983 rigs a year ago.

The recent EIA Weekly Petroleum Status report showed that U.S. domestic oil production decreased to 11.5 million barrels per day (bpd), and it will continue to fall as the number of drilling rigs keeps decreasing.

Tomorrow, the API Crude Oil Stock Change report will provide a fresh opportunity to evaluate whether the continued production cuts lead to a decrease in oil inventories.

Oil inventories are a major obstacle on oil’s way to higher levels so traders and investors will continue to watch them on a weekly basis in an attempt to assess whether the rebound of oil demand is robust.

Currently, the U.S. domestic oil production looks set to dip below 11 million bpd sometime this year as low oil prices put pressure on producers and force them to shut uneconomic wells.

In case oil stays lower for longer, U.S. production will continue to trend down as some producers will lose the protection from the hedging programs they had for 2020 and will be forced to adjust their production levels.

It’s Still Hard To Evaluate The Timing Of Oil Demand Recovery

The American Automobile Association decided not to release the traditional Memorial Day forecast as it was too hard to evaluate the future dynamics of the oil demand as the economy attempts to rebound following the acute phase of the coronavirus crisis.

At this point, the trajectory of oil demand rebound is the biggest unknown catalyst for the oil market. The situation is much clearer on the production front since OPEC+ nations have officially announced production cuts while U.S. oil production continues to decline at a predictable pace.

While production cuts are certainly improving the market situation, it takes two to tango, so oil also needs support from the demand side.

It remains to be seen whether traders will be ready to increase their bets on oil without seeing tangible evidence of improved oil demand. For now, the oil market is in the optimistic mood, and the upside trend remains intact.

For a look at all of today’s economic events, check out our economic calendar.

Silver Price Daily Forecast – Silver Stays Above $17.00

Silver Video 25.05.20.

Silver Searches For A New Support Level Near $17.00

Silver continues to stabilize following the pullback after the major upside move which took silver from $15.50 to $17.50 in a matter of few days.

Gold lacks upside momentum but stays firmly above the key $1700 level. Higher gold prices attract new money to the whole precious metal segment and are bullish for silver.

Gold/silver ratio stays above the 100 level but an attempt to get above 102 was met with increased resistance. Gold/silver ratio is elevated compared to pre-crisis levels so in case it continues the recent downside trend, silver will likely experience additional upside momentum.

The U.S. dollar is flat against a broad basket of currencies, and the U.S. Dollar Index has settled near the 100 level. Stronger U.S. dollar is bearish for silver since it makes silver more expensive for buyers who have other currencies, and the recent strength of the American currency put some pressure on silver.

The U.S. – China tensions continue to increase on a daily basis but it remains to be seen whether it will lead to additional strength in the precious metal segment. At this point, it’s hard to say that this is an important factor for silver price dynamics.

Technical Analysis

silver may 25 2020

Silver continues to get support in the area between $16.50 and $17.00. Initially, the pre-crisis level at $16.50 served as the first support level for silver following its rapid rise from $15.50 to $17.50, but it looks like a higher support level at $17.00 may be formed in case silver manages to stay above it for the upcoming trading sessions.

In case silver settles below $17.00, it will likely head towards the next support at $16.50. If the downside momentum is strong enough, the 20 EMA level at $16.20 may be tested as well.

On the upside, the nearest resistance for silver is located at $17.50. In case this level is breached to the upside, silver will likely gain additional upside momentum and head towards the next resistance level at $18.15.

I’d note that RSI has left the overbought territory, increasing chances for the next upside move in case silver gets support from positive catalysts. In another bullish development, the 20 EMA has recently breached the 50 EMA to the upside, suggesting that the upside momentum continues to increase.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Looks Set To Test The 3000 Level

Low Interest Rates And Unprecedented Monetary Stimulus Continue To Push Stocks Higher

The U.S. stock market is closed due to the Memorial Day holiday but traders will likely keep their holidays short as S&P 500 is positioned to test the 3000 level soon.

Stocks keep rising despite the flood of negative economic data. U.S. Initial Jobless Claims reports have already shown cumulative job losses of more than 38 million since the beginning of the coronavirus crisis, while Continuing Jobless Claims are expected to stay above 25 million.

Some would argue that the market is going higher since it looks past the initial recovery phase and is not concerned with the current situation given the broad measures implemented by the world governments and central banks.

However, it looks increasingly possible that the main reason behind the market rally are expectations of perma-low interest rates which make stocks attractive even at high levels.

In A Low Interest Rate World, Even Expensive Stocks Are Attractive

Now that an unprecedented amount of money has been infused into the world’s financial system, it has to be parked somewhere. Traditional safe haven assets like government bonds are yielding almost nothing, and some countries, like Germany or France, enjoy negative yields on their ten-year bonds.

In these circumstances, investors’ “bar” for stocks is lowered. Dividend yield expectations for safer, blue-chip stocks are declining, allowing them to gain richer valuations.

This process allows the market to withstand the pressure from declining earnings forecasts. However, it remains to be seen whether the stock market will stay invincible to poor economic data and bad earnings reports.

U.S. – China Relations Are In The Headlines Now, But The Market Will Increasingly Focus On The Second Quarter Earnings Season

U.S. – China relations continue to deteriorate on a daily basis. The U.S. accuses China of a cover-up during the initial stage of the coronavirus pandemic and also tries to put pressure on China due to the upcoming security law in Hong Kong. In turn, China promises to retaliate if anti-China measures are implemented.

However, the market should be able to withstand this pressure in case traders and investors believe that the absolute bottom in corporate earnings will be reached in the second quarter and that it will be followed by a swift rebound.

The main question right now is how bad the second-quarter reports will look like. Given this uncertainty, the market may find it harder to gain ground after disappointing economic reports.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – Support At 1.2170 In Sight

GBP/USD Video 25.05.20.

U.S. – China Tensions Provide Support To The U.S. Dollar

GBP/USD is flat in a quiet trading session as the financial markets in the U.S. and UK are closed for holidays.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has settled near the 100 level. In recent days, the U.S. dollar was supported by increasing U.S. – China tensions due to Hong Kong security law.

The U.S. has already signaled that the implementation of the law may lead to U.S. sanctions, worsening an already challenging relationship between the two biggest economies at a time when the world economy tries to recover from the acute phase of the coronavirus crisis.

In the UK, the week is set to be quiet on the economic data front. In the U.S., the key economic reports are the second estimate of the first-quarter GDP Growth Rate and the new Initial Jobless Claims data which are both scheduled to be published on Thursday.

GDP Growth Rate is expected to shrink by 4.8% while the Initial Jobless Claims report is projected to show that 2 million of Americans filed for unemployment benefits in a week.

Technical Analysis

gbp usd may 25 2020

GBP/USD has settled near the first material support level at 1.2170. If this level is breached to the downside, GBP/USD will likely gain additional downside momentum and head towards the next support level at the recent lows at 1.2080.

In this scenario, GBP/USD should have better chances to get below the support at 1.2080. In case it happens, the pair will likely decline further towards 1.2000.

I’d note that GBP/USD has recently failed to settle above the key resistance level at 1.2250 and confirmed the existing downside trend. As long as GBP/USD stays below 1.2250, the risks are shifted to the downside.

On the upside, the above-mentioned major resistance at 1.2250 is the first important resistance level for GBP/USD.

If GBP/USD manages to settle above this level and above the 20 EMA which has declined to the same area, it will gain material upside momentum and head towards the next resistance level at the 50 EMA at 1.2350.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Daily Forecast – Weaker Oil Puts Pressure On Canadian Dollar

USD/CAD Video 22.05.20.

U.S. Dollar Continues To Rebound From The Major Support Level

USD/CAD got back above 1.4000 as the U.S. dollar gained ground against a broad basket of currencies while the Canadian dollar found itself under pressure due to the sell-off in the oil market.

The U.S. Dollar Index has found material support near the 99 level and has rebounded towards the 100 level. The U.S. Dollar Index continues to stay in the range between 99 and 101, and a move out of this range will likely be required for a decisive move in USD/CAD.

The demand for safe haven assets is increasing as China decided to drop its annual GDP target while U.S. – China tensions continued to increase. The recent developments in China put pressure on oil, while weaker oil contributed to weakness of the Canadian dollar.

Canada has recently reported its Retail Sales data for March. Retail Sales were down 8.4% on a year-over-year basis and declined by 10% on a month-over-month basis.

Almost all of the decline was attributed to the decrease in auto sales since Retail Sales excluding Autos were down just 0.4%.

Traders and investors should note that Canada reported data for March while most developed countries have already reported Retail Sales data for April so Canada’s numbers are not directly comparable to recent reports by other countries.

Technical Analysis

usd cad may 22 2020

 

USD/CAD continues to rebound from the strong support level at 1.3850. The pair has already managed to get above the 50 EMA at 1.3985 and the 20 EMA at 1.4010.

The next resistance for USD/CAD is located at 1.4150. The two previous rebounds in USD/CAD were stopped at this level, so it is a material obstacle on the pair’s way to the major resistance at 1.4250.

I maintain my view that USD/CAD will need additional upside catalysts to get a realistic chance to get through the resistance at 1.4250. Such catalysts could include a major sell-off in the oil market or a rush to safety in the world markets which would provide additional demand for safe haven assets like the U.S. dollar.

On the support side, USD/CAD has a major support area between 1.3850 and 1.3900 while levels that are located above this area are much weaker. From a big picture point of view, the pair stays range-bound between 1.3850 and 1.4250.

Oil Falls On Worries About China’s Economic Growth

Oil Video 22.05.20.

China Abandons Its Annual GDP Target

Today’s oil trading is centered around news from China. The first important catalyst is China’s decision to proceed without a GDP growth target.

The reason for this move is the huge uncertainty over economic growth perspectives as well as the increasing tensions with the U.S. which make the trade situation hard to evaluate.

Yesterday, I wrote that coronavirus pandemic got to the less-prepared areas of the world and put additional pressure on current world economic growth forecasts.

While some industries were trying to move out of China into cheaper countries even before the pandemic, China is still the world’s factory which heavily depends on the health of the world economy.

If the world dives deeper into recession, China will not be immune even if it fully controls the virus within its borders. This is a bearish scenario for oil and other resources whose price strength depends on China as one of the leading customers.

In this light, the sell-off in oil is not surprising. The recent rally was very significant and needed a pullback anyway. In addition, there’s another negative China-related catalyst in play.

U.S. Is Set To Increase Pressure On China

China decided to pass legislation aimed at containing pro-democracy protests in Hong Kong. The U.S. critisized the move. Some U.S. senators have already promised to introduce legislation to impose santions on those Chinese officials who violated the independence of Hong Kong.

According to a Reuters report, the U.S. also aims to attack China’s HiSilicon, which develops chips for Huawei.

Nowadays, news about the increase in U.S. – China tensions appear almost on a daily basis. While the actual moves are limited, the relations between the U.S. and China are clearly deteriorating, posing additional risks for the oil market.

Recently, China’s oil demand got to pre-crisis levels, and anything that endanger this progress will be taken as a negative catalyst for oil.

Despite all the gloomy news on the China front, it remains to be seen whether the current pull back can turn into something more serious. The recent fundamental data was strong as inventories showed signs of decline while production cuts were aggressively implemented all over the world.

If the upcoming  reports show decreases in both inventories and production, oil prices may get additional support despite worries about a new phase of the U.S. – China trade war.

Silver Price Daily Forecast – Silver Starts To Rebound After Sell-Off

Silver Video 22.05.20.

U.S. Dollar Strength Is An Obstacle On Silver’s Way Up

Silver tries to gain ground following the material correction after the major upside move.

The U.S. dollar presents a headwind for silver as it continues to gain ground against a broad basket of currencies. The U.S. Dollar Index has found material support near the 99 level and is currently located closer to 100. Stronger U.S. dollar makes silver less attractive for buyers who have other currencies.

Gold is rebounding after yesterday’s sell-off. I’d note that the sell-off in gold was not as material as in silver since the previous gold’s upside move was measured while silver made a really big move.

Gold/silver ratio continues to rebound from the 100 level and remains at highly elevated levels compared to pre-crisis levels. Before the coronavirus hit the economy and caused a deep correction in silver prices, gold/silver ratio was below 90.

The stock market direction may be less of a factor today as the U.S. stock market is mixed ahead of the Memorial Day weekend. However, there’s a possibility that the sell-off in Hong Kong, which was caused by China’s law aimed at containing protest activity, will increase demand for safe haven assets.

Technical Analysis

silver may 22 2020

Silver met signficiant resistance at $17.50 while RSI was in the overbought territory and gold/silver ratio met support at 100. A combination of these factors have led to a material sell-off which pushed silver below $17.00.

No support levels have been formed between the resistance level at $17.50 and the support level at $16.50. However, silver received support above $16.50, which remains the nearest support level for silver.

In case silver settles below $16.50, it will gain additional downside momentum and head towards the 20 EMA level at $16.10. A move below the 20 EMA will push silver towards the 50 EMA at  $15.80, right at the April highs.

On the upside, silver will have to deal with the major resistance at $17.50. RSI has pulled back from the overbought territory so it will be an easier task if right catalysts emerge.

If silver manages to settle above the resistance at $17.50, it will gain additional upside momentum and head towards the next resistance level at $18.15.

U.S. Stocks Mixed Ahead Of Memorial Day Weekend

U.S. – China Tensions Increase On A Daily Basis

S&P 500 futures were losing ground in early morning trading but then managed to recover.

The major sell-off in Hong Kong impacted early trading. China is set to impose new legislation that will target pro-democracy protests in Hong Kong.

Market participants are afraid that additional clampdown on Hong Kong’s freedoms will lead to a loss of its international finance center status.

The U.S. has already criticized the upcoming law and promised to react if the law is implemented.

While the first phase of the trade deal between the U.S. and China is being implemented despite coronavirus pandemic, the market fears that U.S. efforts to contain rising influence of China will destroy some supply chains and hurt the world economy at a time when it suffers from consequences of virus containment measures.

China Drops GDP Target

Another news that impacts today’s trading also comes from China. Previously, China openly announced its annual GDP growth target and worked to achieve it.

This time, China decided not to set such goals as the coronavirus pandemic created too much uncertainty. China’s Premier Li Kequiang also added that trade situation remained very uncertain, hinting at the increasing tensions with the U.S.

China’s decision not to set GDP growth target is especially negative for the resource sector as China is a major consumer of resources. Crude oil is already correcting from previous highs, while the other China-sensitive resource, copper, is also under pressure.

Argentina Is On The Verge Of Default

Argentina continues negotiations with its creditors in order to restructure $65 billion of debt. Argentina’s finances were in rather poor shape before COVID-19 hit the world economy, and the virus pushed the economy into the abyss.

If Argentina defaults on the upcoming $500 million bond payment, it will have a ninth default. It remains to be seen whether the country will maintain full access to financing after the default, but I’d note that previous defaults did not stop various institutions from lending to Argentina.

Potential negative impact  on the world markets may be limited by the huge monetary stimulus that was implemented by the world central banks to support economies during the current crisis as there’s no liquidity shortage in the world right now.

GBP/USD Daily Forecast – British Pound Loses Ground After Retail Sales Report

GBP/USD Video 22.05.20.

UK Retail Sales Decline By 18.1% Month-Over-Month

GBP/USD continues to trade near 1.2200 after the release of new UK economic data.

UK Retail Sales were down 18.1% month-over-month and decreased by 22.6% year-over-year in April as virus containment measures put heavy pressure on consumer activity.

Excluding fuel, Retail Sales dynamics look a bit better, showing a decline of 15.2% on a month-to-month basis.

Yesterday, the market digested Flash PMI data for both the U.S. and the UK. In the U.S., Flash Manufacturing PMI rose from 36.1 in April to 39.8 in May, while Flash Services PMI grew from 26.7 in April to 36.9 in May.

In the UK, Flash Manufacturing PMI increased from 32.6 to 40.6 while Flash Services PMI jumped from 13.4 to 27.8.

In both countries, the services sector had a strong rebound as virus containment measures were relaxed. Services were the hardest-hit sector of the economy as lockdowns hurt them much more than manufacturing, and a rebound in services may signal that the job situation will soon start to improve.

The key question for GBP/USD dynamics is whether the Bank of England will decide to use negative interest rates to boost recovery.

At this point, the Bank of England relies on QE to improve the economic situation. If the rates go into the negative zone, GBP/USD will experience significant selling pressure.

Technical Analysis

gbp usd may 22 2020

GBP/USD failed to settle above the key resistance level at 1.2250 and continues to trend down. The nearest support level for the pair is located at 1.2170.

If this level is breached to the downside, GBP/USD will gain additional downside momentum and head towards the next support level at the low of the recent downside move at 1.2080.

I’d note that failure to settle above 1.2250 is a bearish signal for GBP/USD, so the downside scenario is more likely at this point.

On the upside, the pair will have to deal with the major resistance at 1.2250 and the resistance at the 20 EMA at 1.2280. Most likely, the whole area between 1.2250 and 1.2280 will serve as a material resistance area for GBP/USD.

If the pair gets above this level, it will gain upside momentum and head towards the next resistance level at the 50 EMA at 1.2360.

 

USD/CAD Daily Forecast – U.S. Dollar Rebounds From Strong Support Level

USD/CAD Video 21.05.20.

U.S. Dollar Gains Ground As Demand For Safe Haven Assets Increases

USD/CAD is rebounding from the major support level at 1.3850 as the U.S. dollar gets support from safe haven buying after the release of U.S. economic data and the increase in U.S. – China tensions.

The U.S. dollar is gaining ground against a broad basket of currencies, and the U.S. Dollar Index has rebounded from a strong support level at 99.

The U.S. Dollar Index remains in a range between 99 and 101, and it is hard to expect decisive action in USD/CAD without a breakout on the U.S. Dollar Index front.

Oil continues to move higher but today this rally does not provide enough support for the Canadian dollar since the demand for the U.S. dollar is just too strong.

In the U.S., Initial Jobless Claims were 2.4 million while Continuing Jobless Claims data showed that 25 million Americans were still out of job. In Canada, ADP Employment Change report for April showed that 227 thousand jobs were lost.

The U.S. Flash PMI reports were better than expected as Flash Manufacturing PMI  increased from 36.1 in April to 39.8 in May while Flash Services PMI went up from 26.7 in April to 36.9 in May.

The rebound in Services PMI is a good sign for the economy as it shows that the service sector has started to recover as virus containment measures were lifted.

Technical Analysis

usd cad may 21 2020

USD/CAD was not able to settle below the key support level at 1.3850 and rebounded above 1.3900. This was the third major attempt to get below 1.3850, but each time the U.S. dollar received material support.

At this point, it is clear that USD/CAD will need a significant catalyst to move below the major support level at 1.3850. If USD/CAD ultimately manages to get below 1.3850, it will likely gain robust downside momentum and quickly find itself at the next support level at 1.3750.

The nearest resistance for USD/CAD is located at the 50 EMA level at 1.3980. In case the pair manages to get above this level, it will head towards the 20 EMA at 1.4010.

As the spread between the 20 EMA and the 50 EMA continues to decrease, the whole area between 1.3980 and 1.4010 may serve as a material resistance level for USD/CAD.

Oil Continues To March Higher As Demand Rebounds

Oil Video 21.05.20.

The Spread Between The Front-Month Contract And Longer-Dated Contracts Continues To Decrease

Yesterday’s inventory report provided an additional boost for oil prices which continue to recover. Declining inventories show that supply cuts are starting to impact the market while demand is increasing as the U.S. economy reopens.

Positive dynamics are seen across all global benchmarks. The spread between the global benchmark Brent and the U.S. WTI has narrowed as market participants concluded that the U.S. will not run out of oil storage.

I’d note that the recent progress on the oil price front is most visible in the front-month July 2020 contract. Longer-dated contracts had less upside, and the spread between the July 2020 contract and the December 2020 contract has narrowed materially.

This means that the market does not anticipate that the recovery will be very strong. Currently, the spread between the July 2020 contract and the December 2020 contract is just $1.50, which is a small number given the highly volatile market situation.

A Truly Global Pandemic Is Still A Risk For The Oil Market

Oil traders are mostly focusing on oil demand from two main consumers – the U.S. and China. This makes sense this these countries have a major impact on the global oil supply/demand balance.

China has recovered after the initial shock from the coronavirus and its oil demand has been increasing in recent weeks, providing support for the oil market. The U.S. is reopening its economy and its oil demand is also showing signs of life.

Meanwhile, the total number of coronavirus cases in the world has passed the 5 million mark, and the virus gained a foothold in the regions that are likely less prepared for the pandemic – Latin America and Africa.

At this point, the market is ignoring this development as it is focused on the production cuts and the reopening of the U.S. economy, but if the virus numbers get worse, the truly global spread of the virus will be hard to ignore.

While U.S. and China will remain the main players on the demand side of the oil market for years to come, problems at the other side of the world could visibly impact the world oil demand as the world economy tries to get out of the recession.

Silver Price Daily Forecast – Silver Fails To Settle Above $17.50

Silver Video 21.05.20.

Silver Loses Ground Together With Other Precious Metals

Yesterday, silver tested the resistance level at $17.50 but failed to settle above it. As I noted in my previous article, RSI was in the overbought territory while gold/silver ratio was in the oversold territory, which meant that silver was poised to experience some resistance on its way up.

Gold is also in a pullback mode, putting pressure on silver. In addition, gold/silver ratio is rebounding from the 100 level. Gold/silver ratio declined from 109 to 100 without any pullback so it’s not surprising to see an uptick on this front.

The U.S. Dollar Index continues to stay above the key 99 level after the release of the U.S. Initial Jobless Claims report which showed that 2.4 million Americans filed for unemployment benefits in a week.

The job data looks grim as Continuing Jobless Claims report showed that 25 million Americans were still out of jobs (this data lags Initial Jobless Claims by one week).

It remains to be seen whether the grim picture on the job front will provide support to the U.S. dollar or boost precious metals which have recently enjoyed material upside as investors searched for protective bets as the U.S. stock market was getting increasingly expensive.

Technical Analysis

silver may 21 2020

The $17.50 level proved to be a material resistance level for silver while high RSI and oversold gold/silver ratio served as additional catalysts for a pullback.

Now, silver will have to deal with the $17.50 level to continue its upside move. In case silver manages to settle above this level, it will gain additional downside momentum and head towards the next resistance level at $18.50.

On the support side, the pre-crisis level at $16.50 will likely serve as the first material support for silver, although additional support may be formed above it in case silver stays below $17.50 but does not gain significant downside momentum.

At this point, silver has received some minor support above $17.10 but it’s too early to tell whether it will serve as a notable level.

In case silver manages to get below $16.50, it will gain additional downside momentum and head towards the next support area between April highs at $15.80 and the 20 EMA at $16.00.

U.S. Stocks Set To Open Lower After The Initial Jobless Claims Report

U.S. Initial Claims Report Comes In Line With Analyst Estimates

S&P 500 futures are pointing to a lower open following the release of the U.S. Initial Jobless Claims report which showed that 2.4 million Americans filed for unemployment benefits in a week, in line with analyst consensus.

Continuing Jobless Claims report showed that 25 million people were getting unemployment benefits compared to consensus of 24.8 million. It should be noted that Continuing Jobless Claims data lags Initial Jobless Claims data by one week.

Today, the market will also have to digest Flash PMI numbers for May. Markit Manufacturing PMI Flash is expected to rise from 36.1 in April to 38 in May, while Markit Services PMI Flash is projected to increase from 26.7 to 30.

World Coronavirus Cases Pass The 5 Million Mark

According to data from Johns Hopkins University, the number of registered coronavirus cases in the world is 5,019,676. U.S. remains the leader with more than 1.5 million cases, with Russia in the second place with more than 300,000 cases and Brazil ranking third.

The recent rise in the number of coronavirus cases in Latin America has raised worries about the situation in the region. Latin America is less prepared to deal with the crisis compared to Europe so its problems with containing the disease may lead to an additional downside revision of the world economy’s growth in 2020.

Another region that may worry the market is Africa, where the epidemic is just getting started but could lead to various disruptions in the resource-rich continent if it is not contained.

U.S. – China Tensions Increase Again

U.S. President Donald Trump has renewed his pressure on China for its failure to stop the spread of coronavirus, saying that China could have easily stopped the disease but did not do it.

Now that the U.S. wants to reroute supply chains out of China while it also tries to limit Huawei’s ability to access modern chips, investors and traders are watching for the signs of a new round of trade war between the two biggest economies in the world.

Making changes to the existing supply chains always comes at a cost so any escalation in U.S. – China relations will further hurt the world economy. However, it remains to be seen whether such escalation will be bearish for markets that are generally optimistic on the upcoming recovery.

GBP/USD Daily Forecast – British Pound Finds Itself Under Pressure

GBP/USD Video 21.05.20.

U.S. Dollar Gains Ground On U.S. – China Tensions

GBP/USD is losing ground as weak inflation data and broader U.S. dollar strength are putting pressure on the pair.

The U.S. dollar is gaining ground against a broad basket of currencies as the market awaits new U.S. Initial Jobless Claims data. Analysts expect that 2.4 million Americans filed for unemployment benefits in a week.

Continuing Jobless Claims are expected to be close to 25 million. Although many weeks have passed since the beginning of the coronavirus crisis, Initial Jobless Claims stay high due to prior backlog and second round of layoffs.

In addition to the U.S. Initial Jobless Claims data, the market will have to digest Flash PMI data for both the UK and the U.S. In both countries, analysts expect to see improvements from previous numbers as the economies have started to reopen.

Adding to the U.S. dollar strength, U.S. President Donald Trump accused China of a “massive disinformation campaign”, increasing fears about a new round of the U.S. – China trade war.

The U.S. dollar is still playing the role of a safe haven asset of last resort so such news are bearish for GBP/USD.

In addition, the U.S. Dollar Index is rebounding from the key support level at 99 and continues to trade in a range between 99 and 101. A move out of this range will lead to increased momentum but so far the U.S. dollar has managed to stay within the above-mentioned limits.

Technical Analysis

gbp usd may 21 2020

In a bearish development, GBP/USD failed to settle above the key resistance level at 1.2250. The next resistance at the 20 EMA is now at 1.2280, so I’d expect that the whole area between 1.2250 and 1.2280 will serve as a major resistance for the pair.

In case GBP/USD manages to settle above the 20 EMA, it will likely gain material upside momentum and head towards the next resistance level at the 50 EMA at 1.2370.

On the support side, the nearest support level is located at 1.2170. If GBP/USD manages to get below this level, it will continue its downside trend and move closer to the recent lows at 1.2080.

The current technical picture is bearish for GBP/USD, and the pair will likely need material upside catalysts to get back to the upside mode.

USD/CAD Daily Forecast – Support At 1.3850 Stays Strong

USD/CAD Video 20.05.20.

U.S. Dollar Weakness And Stronger Oil Push USD/CAD To The Downside

USD/CAD continues its attempts to get through the support level at 1.3850 as the U.S. dollar loses ground against a broad basket of currencies.

The U.S. Dollar Index, which has been in a range between 99 and 101 since early April, is currently located at the low end of this range as global market optimism leads to reduced demand for safe haven assets.

Interestingly, the Canadian dollar ignored inflation data which showed that prices were under pressure due to weaker demand and virus-related restrictions.

In April, Inflation Rate was -0.2% year-over year and -0.7% month-over-month. Prices decreased more than analysts expected. I’d note that short-term deflation is seen in many developed countries, and the key question is whether massive monetary stimulus could quickly get prices back to the upside trend.

Oil price upside is serving as additional supportive factor for the Canadian dollar as oil continues its rally following the release of EIA Weekly Petroleum Status report which showed that crude inventories declined by 5 million barrels.

At this point, traders believe that the worst is over for the oil market, and Canadian oil benchmarks are enjoying material upside.

Technical Analysis

usd cad may 20 2020

USD/CAD has already made a number of attempts to get below the key support level at 1.3850. Early attempts ended with robust rebounds which took the pair above 1.4100.

However, the downside pressure increases, and the current attempt has better chances to succeed, especially in case the U.S. Dollar Index dives below 99 or we see additional upside in the oil market.

In case USD/CAD settles below 1.3850, it will gain additional downside momentum and head towards the next support level at 1.3750. Given the time that USD/CAD has spent in the range between 1.3850 and 1.4250, the downside move may be very fast.

On the upside, the pair will need to settle back above 1.3900 to get a chance to test the next resistance level at the fifty ema at 1.3980. In case USD/CAD manages to get above the 50 EMA, it will gain upside momentum and head towards the next resistance level at the 20 EMA at 1.4020.

Oil Continues To Rally As Crude Inventories Fall

Oil Video 20.05.20.

EIA Report Shows That U.S. Oil Production Declined To 11.5 Million Barrels Per Day

Yesterday, API Crude Oil Stock Change report showed that crude oil inventories decreased by 4.84 million barrels.

Today’s EIA Weekly Petroleum Status report confirmed these numbers. According to EIA, crude oil inventories decreased by 5.0 million barrels.

At the same time, gasoline inventories increased by 2.8 million barrels while distillate fuel inventories increased by 3.8 million barrels.

The increase in gasoline and distillate fuel inventories can limit the traders’ joy from the decrease in crude oil inventories.

On the production side, the U.S. domestic production decreased from 11.6 million barrels per day (bpd) in the previous week to 11.5 million bpd. Thus, production fell by 100,000 bpd compared to the previous decline of 300,000 bpd.

It remains to be seen whether the market will be satisfied by the pace of the production decline. On the one hand, the continued downside trend is positive for the domestic oil market while declining inventories suggest that supply/demand balance has improved thanks to production cuts and improvements in oil demand.

On the other hand, traders would like to see a more aggressive decline of production as inventory levels remain elevated and will continue to put pressure on oil prices for the upcoming months.

OPEC Is Satisfied With The Current Progress

According to Reuters, OPEC’s secretary general Mohammad Barkindo stated that the oil markets positively responded to robust production cuts by participants of the OPEC+ deal.

That said, it is unclear whether OPEC+ will choose to keep the current production cut levels intact or supply more oil to the market in July according to the original schedule of production cuts.

The problem is that many oil producing countries rely on oil revenues to replenish their budgets, and current oil prices are not sufficient enough to provide support for their finances.

In this light, OPEC+ countries are interested in working through the backlog of inventories as fast as possible to boost prices to better levels. At the same time, the rate of oil demand recovery remains a mystery as countries have only recently started to lift virus containment measures.

The futures market remains rather sceptical about long-term upside in oil prices. The front-month July 2020 contract enjoys biggest gains, while December 2020 contract continues to trade near the $35 level.

Silver Price Daily Forecast – Widespread Optimism In Precious Metals Boosts Silver

Silver Video 20.05.20.

Silver Tests The $17.50 Level

Silver continues its upside move, boosted by general rally in the precious metal segment and the weaker U.S. dollar.

As I previously noted, gold’s ability to stay above the key $1700 level should increase the flow of money into the precious metal segment.

Gold is currently trading close to $1750 per ounce, while platinum and palladium are in a rally mode. This positive mood is bullish for silver which tries to settle above the resistance at $17.50.

The weaker U.S. dollar is also playing its role. The U.S. Dollar Index, which measures the strength of the American currency against a broad basket of currencies, has settled closer to the 99 level.

The U.S. Dollar Index remains in a range between 99 and 101, and a downside breakout will be bullish for silver as cheaper U.S. dollar makes silver more attractive for buyers who have other currencies.

The equity market is getting closer to new post-crisis highs so demand for safe haven assets like the U.S. dollar may decrease further, providing additional support for silver.

Technical Analysis

silver may 20 2020

Silver is trying to settle above the key resistance level at $17.50. Silver has already made several attempts to get above $17.50 but met material resistance.

RSI is in the overbought territory, and silver may need a minor pullback before it is able to get above the nearest resistance level.

I’d note that gold/silver ratio has met support at the 100 level . RSI for the gold/silver ratio is in the oversold territory, suggesting that silver might experience some headwinds in the upcoming trading sessions unless gold prices get above $1750 per ounce and provide an additional boost for the whole precious metal segment.

In case silver is able to settle above $17.50, it will likely experience additional upside momentum and head towards the next support level at $18.15.

On the support side, the nearest support for silver is located at pre-crisis levels at $16.50. Silver upside was fast so no additional levels were formed between $16.50 and $17.50.

In case silver gets below $16.50, it may gain increased downside momentum and head towards the 20 EMA level which is near the April highs at $15.80.

The 20 EMA has recently crossed the 50 EMA to the upside, suggesting increased upside momentum, but the overbought situation in silver and the oversold situation in the gold/silver ratio may lead to increased resistance in the near term.