Oil Gets Back Above $40 As Traders Cheer Encouraging Manufacturing PMI Data

Oil Video 03.08.20.

U.S. Oil Rig Count Falls Again

The recent Baker Hughes Rig Count report showed that the number of active rigs in the U.S. remained flat at 251. Meanwhile, the number of rigs drilling for oil declined by 1 to 180.

The previous report showed that the number of U.S. rigs drilling for oil increased by 1 to 181. Some traders have started to worry that such increase signals the beginning of a new upside trend in U.S. production which would be bearish for the oil market.

Fortunately for oil bulls, the new Baker Hughes Rig Count report has indicated that U.S. producers are not ready to meaningfully increase production at current oil prices.

This is especially important at times when OPEC+ countries are increasing their production by two million barrels per day (bpd) as they gradually ease the previous production cuts.

For example, Russia has stated that its oil production was in line with the OPEC+ deal in July while it has reportedly increased its oil production in the first days of August.

In this situation, an increase of production from U.S. shale companies could serve as a material bearish catalyst. However, the recent data indicates that U.S. oil production is set to remain mostly flat in the near term, which is good for the oil market.

Positive Manufacturing PMI Reports Provide Support To Oil Prices

WTI oil’s recent attempt to settle below the key $40 level was not successful, and oil is back above $40.

Oil prices got material support from the release of Manufacturing PMI reports. In Euro Area, Manufacturing PMI increased from 47.4 in June to 51.8 in July. In the U.S., Manufacturing PMI grew from 49.8 to 50.9. Numbers above 50 show expansion.

Traders are betting that recent improvements in the manufacturing segment will boost oil demand and support oil prices.

However, it remains to be seen whether the growth in the manufacturing segment will be sufficient enough to offset worries about new restrictive measures which are implemented to stop the spread of coronavirus.

Most recently, Philippines imposed a new two-week lockdown in its capital Manila to slow down the spread of the disease.

In Europe, the travel sector recovery is once again postponed as countries introduce quarantine measures for travellers and require them to wear masks.

According to a recent Reuters report, most potential tourists from UK, France and Germany will skip a holiday if they need to get tested for COVID-19 and are required to wear face masks. This does not bode well for the recovery of jet fuel demand.

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

Crude Oil Price Forecast – Crude Oil Markets Continue to Get Squashed

WTI Crude Oil

The West Texas Intermediate Crude Oil market has done very little during the trading session again on Monday as we continue to see the market chop back and forth. We are essentially stuck between the 50 day EMA on the bottom and the 200 day EMA on the top. If that is going to be the case, then it is likely that what we are going to see is a market that continues to look for some type of longer-term catalyst. Right now, we simply do not have one. We have a lot of things going on at the same time that they seem to be canceling each other out.

Crude Oil Video 04.08.20

Brent

Brent markets of course are doing the same thing, as we have no real drive to go in one direction or another. As long as the US dollar continues to struggle, it is likely that we will see a bit of upward pressure, but at the same time we have to worry about whether or not there is enough demand, and of course whether or not there is going to be compliance when it comes to OPEC countries. So far, the compliance has been relatively strong so that has been one of the boosts higher and of course with the US dollar certainly that helps to. However, and this is a huge thing, demand is most certainly down as the lack of air travel alone has taken a huge chunk out of it.

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

Oil Price Fundamental Daily Forecast – Rangebound as Big Money Waits on Sidelines for Demand Clarity

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Monday, but posting a second-consecutive rangebound day as prices remain inside last Thursday’s unusually wide trading range. The price action suggests a couple of things, investor indecision or the transitioning from bullish to bearish as the market adjusts to COVID-19 related demand shifts that are likely to lead to a rise in global supply.

At 13:30 GMT, September WTI crude oil is trading $40.45, up $0.18 or +0.45%. December Brent crude oil is at $44.54, up $0.37 or +0.84%.

Other analysts agree that prices are being pressured by rising coronavirus cases around the globe and by oversupply worries as OPEC and its allies are set to wind back up output cuts in August, but supported by positive industry data in Europe and Asia.

Stronger PMI Data Out of China, Euro Zone

A private survey released Monday showed China’s manufacturing activity expanded in July. The Caixin/Markit manufacturing Purchasing Manger’s Index came in at 52.8 for July, above expectations for a reading of 51.3 by economists in a Reuters poll.

In the Euro Zone, manufacturing activity across the region expanded for the first time since early 2019 last month as demand rebounded after more easing of the restrictions imposed to quell the spread of the new coronavirus, a survey showed on Monday.

IHS Markit’s final Manufacturing Purchasing Managers’ Index bounced to 51.8 in July from June’s 47.4 – its first time above the 50 mark that separates growth from contraction since January 2019.

Russia is Raising Oil Output as OPEC+ Cuts Ease:  Reuters Source

Russian oil and gas condensate output increased to 9.8 million barrels per day (bpd) on August 1-2 from 9.37 million bpd in July as the country eases production curbs under an OPEC+ deal, a source familiar with data said on Monday. The Energy Ministry declined to comment on the data.

Russia has said it will increase its crude oil production by 400,000 bpd as part of that deal, which does not include output of gas condensate, a light oil.

Daily Forecast

WTI and Brent crude oil could remain rangebound until traders get more clarity about how the new surge in COVID-19 cases will affect demand. Traders are also likely to try to hold prices in a range until they see how the OPEC+ output cut tapering changes the supply dynamic.

With most money managers on the sidelines or investing in other momentum driven markets like the metals, crude oil speculators are getting a little nervous about attacking the long side of the market because of worries over the strength of the demand recovery. Bullish speculators are concerned that the surge in coronavirus cases in the U.S. and around the world could slow the recovery if more restrictions are put into place.

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

Oil Fixed Between $43-44

A new stage of the OPEC+ agreement is coming into effect. Starting from August 1st, the daily reduction of oil production is 7.7 million barrels, which is lower than the previous value, 9.7 barrels. This restriction is supposed to be valid for countries members of OPEC+ until the end of the year.

Market players are worried by the possibility of oversupply. It may well be that a stable price for oil might sooner or later boost the USA to increase oil extraction. This is exactly what is putting pressure on the oil right now.

Another thing that pushes the oil price is the coronavirus: the number of new cases is going up, which means that all pandemic-related risks are not going away anywhere.

In the H4 chart, Brent is still correcting towards 42.80. After reaching this level, the asset may form one more ascending wave to break 44.04 and then continue trading upwards with the short-term target at 45.33. Later, the market may correct towards 44.50 and then start another growth to reach 46.46. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving below 0 in the histogram area. After the line leaves the area and breaks 0 to the upside, the correction may be over.

Изображение выглядит как карта, текст Автоматически созданное описание

As we can see in the H1 chart, Brent is consolidating around 43.30; it has already broken this level to the downside and may continue falling to reach the correctional target at 42.80. After that, the instrument may start a new growth to break 43.30 and then continue trading upwards to reach 44.04. And that’s just a half of another ascending wave.

From the technical point of view, this idea is confirmed by Stochastic Oscillator: its signal line is moving to rebound from 50 to the downside. Later, the line is expected to fall to reach 20 and rebound from it. After that, the correction may be over. If later the line breaks 50, the price chart may boost its growth.

Изображение выглядит как текст, карта Автоматически созданное описание

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

Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex


Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

OIL Break Below 38.80 is Possible as the Price is Bearish

Oil has moved lower making a swing below 40, which implies a possible bearish continuation. We could see 38.80.

The POC zone is 40.50-41.00. We might see a move towards the POC zone first before the next rejection. If not then a direct drop might happen from 40.00. A bearish rejection off the zone should be targeting 39.60 and 39.31. A retest of 38.80 is important. Continuation below towards 37.26 at the break of 38.80. Only above 41.00, bears will be in danger.

The Analysis has been done with the CAMMACD.Core and Sit Systems

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

 

The Week Ahead – COVID-19, Economic Data and US Politics in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 7th August. In the week prior, just 57 stats had been in focus.

For the Dollar:

It’s another busy week ahead on the economic data front.

In the 1st half, the ISM’s July private sector PMIs, ADP nonfarm employment change figures, and June factory orders are in focus.

We would expect Wednesday’s ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change to have the greatest impact.

The focus will then to Thursday’s initial jobless claims and Friday’s nonfarm payroll numbers and unemployment rate.

Following some disappointing weekly jobless claims figures and the rise in COVID-19 cases, the labor market figures will be key.

For the service sector, any contraction in July, following a jump in productivity in June, would also weigh on riskier assets.

The Dollar Spot Index ended the week down by 1.15% to 93.349.

For the EUR:

It’s also another busy week ahead on the economic data front.

On Monday and Wednesday, July’s manufacturing and services PMIs are due out of Italy and Spain.

Finalized PMIs are also due out of France, Germany, and the Eurozone.

With Spain seeing a spike in new COVID-19 cases, expect some attention to the PMIs. Ultimately, however, the Eurozone’s services and composite will likely have the greatest impact.

The focus will then shift German factory orders for June, due out on Thursday.

At the end of the week, Germany remains in focus, with June’s industrial production and trade figures due out.

Barring disappointing numbers, June retail sales figures for the Eurozone should have a muted impact on Thursday.

The EUR/USD ended the week up by 1.05% to $1.1778.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. July’s finalized private sector PMIs are due out and will garner plenty of interest.

Expect any downward revision to the Services PMI on Wednesday to have the greatest impact.

On Thursday, the focus will then shift to the BoE. More action is expected and the Bank may consider an extension to the suspension of banks paying dividends and buybacks.

While the BoE is in action, we can also expect any further updates on Brexit to also influence in the week.

The GBP/USD ended the week up by 2.27% to $1.3085.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Wednesday, June’s trade figures are due out ahead of July employment numbers on Friday.

Expect the employment figures to have the greatest impact, however.

Barring dire numbers, the Ivey PMI for July should have a muted impact on the Loonie on Friday.

Away from the stats, COVID-19 and geopolitics will continue to influence crude oil prices and risk sentiment.

The Loonie ended the week up by 0.02% to C$1.3412 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

At the start of the week, the Manufacturing Index figures are due out ahead of a busy Tuesday.

We would expect manufacturing PMIs from China, the EU, and the U.S to have a greater impact, however, on Monday.

The focus will then shift June trade and retail sales figures due out on Tuesday. Expect the retail sales figures to have the greatest impact. The RBA continues to rely on consumer spending to support the economy. Weak numbers will be a test for the Aussie Dollar.

For the week, however, the main event is the RBA monetary policy decision on Tuesday.

Following the spike in new COVID-19 cases, will the RBA remain optimistic about the economic recovery?\

Any dovish chatter and the Aussie Dollar could eye sub-$0.70 levels. At the end of the week, the RBA’s statement on monetary policy will also draw interest.

The Aussie Dollar ended the week up by 0.53% to $0.7143.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic calendar.

2nd quarter employment figures are due out on Wednesday. The markets will likely be forgiving to an extent, with COVID-19 expected to have an impact on employment.

With economic data on the lighter side, private sector PMIs from China, the EU, and the U.S will influence.

Expect geopolitics and COVID-19 news to also have an impact in the week. Any signs of a slowdown in new cases globally and expect support to kick in.

The Kiwi Dollar ended the week down by 0.18% to $0.6629.

For the Japanese Yen:

It is a busy week ahead on the economic calendar.

Finalized 2nd quarter GDP and July’s manufacturing PMI numbers are due out on Monday.

The focus will then shift to July’s service PMI on Wednesday and June household spending figures on Friday.

While the stats will influence sentiment towards BoJ monetary policy, the Yen will remain at the mercy of COVID-19 and geopolitics.

The Japanese Yen ended the week up by 0.29% to ¥105.83 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead on the economic data front.

July’s private sector PMIs are due out on Monday and Wednesday. Expect the figures to influence risk appetite in the week.

On Friday, July trade figures will also garner plenty of attention. While exports remain the main area of focus, any sizeable fall in imports would test risk appetite on the day.

Away from the economic calendar, any chatter from Beijing will also need monitoring.

The Chinese Yuan ended the week up 0.62% to CNY6.9752 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus. Talks are set to continue through August and September ahead of an EU Summit in October.

60 days may sound like a lot but when considering the lack of progress over 4-years…

A light economic calendar and Brexit chatter have provided the Pound with support. We may even see the markets brush off the chances of a hard Brexit.

Getting on with it seems to be the key desire now rather than dragging it out any longer. Either way, we’re not expecting Johnson and the team to give too much away…

U.S Politics:

Last week, the Republicans showed signs of fragmentation. As Presidential Election stress builds, we could see more fractures as Trump attempts to distract voters.

The immediate issue at hand, however, is the COVID-19 stimulus package. Any failure to deliver will weigh on the Dollar. Labor market conditions have not improved and the 2nd wave has shown little sign of slowing. A lack of benefits for the unemployed will raise more issues than a fall in household spending. We have already seen social unrest…

The Coronavirus:

It was yet another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw a number of countries including Hong Kong and the UK reintroduce containment measures. Hopes of progress towards a vaccine had limited the damage last week. In the week ahead, however, the numbers will need to ease off to avoid spooking the markets.

At the time of writing, the total number of coronavirus cases stood at 17,981,937. Monday to Saturday, the total number of new cases increased by 1,782,490. Over the same period in the previous week, the total number had risen by 1,531,149.

Monday through Saturday, the U.S reported 447,236 new cases to take the total to 4,762,945. This was up marginally from the previous week’s 417,070

For Germany, Italy, and Spain, there were 22,814 new cases Monday through Saturday. This took the total to 793,804. In the previous week, there had been 17,083 cases over the same period. Spain accounted for 16,101 of the total new cases in the week.

Crude Oil Price Update – COVID-19 Demand Issues Continue to Cap Gains

U.S. West Texas Intermediate crude oil futures finished higher on Friday just one day after a plunge nearly erased all of the month’s gains. That move ensured a lower close for the week. Prices were boosted on Friday by the news that U.S. oil output cuts in May were the largest on record.

On Friday September WTI crude oil settled at $40.43, up $0.51 or +1.28%.

U.S. crude oil production plummeted in May, falling a record 2 million barrels per day to 10 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report on Friday.

In related news, Chevron Corp reported an $8.3 billion loss on asset write-downs and ExxonMobil Corp recorded a second consecutive quarterly loss.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Thursday when sellers took out three main bottoms at $40.48, $39.97 and $38.77 before stopping at $38.72.

A trade through $38.72 will signal a resumption of the downtrend, while a move through $41.93 will change the main trend to up.

On the upside, the major resistance is a long-term 50% level at $41.72.

On the downside, retracement zone support comes in at $39.92 to $39.30.

The new minor range is $41.93 to $38.72. Its 50% level at $40.32 acted like minor resistance on Friday. It could control the direction of the trade on Monday.

Short-Term Outlook

The news writers said that the market was supported by some bullish data from May. Obviously it is stale news. If you followed the Baker Hughes numbers released each Friday, you would’ve seen a drop in the number of producing oil rigs. This means production was going down. No surprise there.

Prices are likely to remain in a range, but with a bias to the downside as long as the number of coronavirus cases continues to rise. This is because of its impact on demand. However, as long as OPEC+ continues to trim production, the supply side shouldn’t get out of control.

From a technical perspective, unless a vaccine is developed over the near-term, buyers are going to have a hard time overcoming the major resistance at $41.72.

Meanwhile, a sustained move under $39.30 could trigger an acceleration to the downside. The daily chart shows $36.96 to $35.83 is a potential downside target. This may actually be good because this zone represents value so a test of this area is likely to attract new buyers.

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

The Weekly Wrap – Economic Data, the FED, and Trump Sank the Dollar

The Stats

It was a busy week on the economic calendar, in the week ending 31st July.

A total of 56 stats were monitored, following the 41 stats from the week prior.

Of the 56 stats, 31 came in ahead forecasts, with 24 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 37, 35 stats reflected a deterioration from previous.

For the Greenback, it was a 6th consecutive week in the red. In the week ending 31st July, the Dollar Spot Index fell by 1.15% to 93.349. In the week prior, the Dollar had fallen by 1.57%.

The continued slide through the month of July left the Dollar Spot Index down by 4.15% for the month.

Dire economic data, the continued spread of COVID-19, and a dovish FED delivered the loss. Adding to the Dollar angst in the week was Trump’s Presidential Election delay tweet on Thursday…

According to a Reuters report, U.S Dollar net shorts surged to the highest in 9-years, delivering the largest monthly loss Since Sept-2010.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 17,731,750 for Friday, rising from last Friday’s 15,930,779 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,801,071 on a global basis. This was higher than the previous week’s increase of 1,741,556 in new cases.

In the U.S, the total rose by 454,463 to 4,702,774. In the week prior, the total number of new cases had risen by 478,299.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 22,753 to bring total infections to 793,804. In the previous week, the total number of new cases had risen by 17,404. Spain alone reported 16,101 new cases in the week.

Out of the U.S

It was a busy week on the economic data front.

Key stats included July consumer confidence, the weekly jobless claims, and 2nd quarter GDP figures.

The stats were skewed to the negative. Consumer confidence deteriorated in July, as a result of the 2nd wave of the pandemic. Initial jobless claims increased for a 2nd consecutive week, with the U.S economy contracting by 32.9% in the 2nd quarter.

At the end of the week, July consumer sentiment figures were also revised down.

There were some positives, however. Durable and core durable goods continued to rise in June.

Chicago’s PMI returned to expansion in July, with personal spending rising for a 2nd consecutive month in June. These were good enough to give the Dollar much-needed support at the end of the week.

In the equity markets, the NASDAQ and S&P500 rose by 3.69% and by 1.73% respectively. The Dow bucked the trend, however, falling by 0.16%.

Out of the UK

It was a particularly quiet week on the economic calendar, with no material stats to provide the Pound with direction.

A lack of economic data contributed to the upside in the Pound that benefitted from Dollar weakness. News of the government reintroducing lockdown measures in the North weighed at the end of the week, however.

In the week, the Pound rallied by 2.27% to $1.3085 in the week, following on from a 1.80% gain from the previous week. The FTSE100 ended the week down by 3.69%, following on from a 2.65% loss from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

In a quiet 1st half of the week, Germany’s IFO Business Climate Index figures for July provided support on Monday.

The focus then shifted to 2nd quarter GDP numbers. France, Germany, and the Eurozone reported particularly dire 2nd quarter numbers.

The German economy contracted by 10.1%, the French economy by 13.8%, and the Eurozone economy by 12.1%.

It wasn’t enough to send the EUR into the red, however, as the U.S delivered darker numbers.

For the week, the EUR rose by 1.05% to $1.1778, following a 2.00% rally from the previous week. A 0.58% pullback on Friday limited the upside for the week.

For the European major indexes, it was another bearish week. The DAX30 slid by 4.09%, with the CAC40 and EuroStoxx600 falling by 3.49% and by 2.98% respectively.

For the Loonie

It was a quiet week on the economic calendar.

Economic data included May GDP and June RMPI numbers at the end of the week.

The stats were positive, with the Canadian economy expanding by 4.5% in May, following April’s 11.7% contraction. In June, the RMPI rose by a further 7.5%, following a 16.4% jump in May.

While the other majors lost ground against the Greenback on Friday, the stats delivered support at the end of the week.

The Loonie rose by 0.02% to end the week at C$1.3412 against the Greenback. In the week prior, the Loonie had rallied by 1.22% to C$1.3415.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 31st July, the Aussie Dollar rose by 0.53% to $0.7143, while the Kiwi Dollar fell by 0.18% to $0.6629. A 1.04% slide on Friday, left the Kiwi in the red for the week.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Inflation and private sector credit figures delivered mixed results in the week.

In the 2nd quarter, consumer prices slid by 1.9%, with prices down by 0.30% year-on-year.

Final delivery numbers were not much better, with the Producer Price Index falling by 1.20% in the 2nd quarter. Year-on-year, the index fell by 0.40%.

The numbers were better than forecasts, which propped up the Aussie Dollar.

Private sector credit disappointed, however, falling by 0.3% in June.

While the Aussie Dollar found support against the Greenback, the latest COVID-19 outbreak pinned back the Aussie.

For the Kiwi Dollar

It was another relatively quiet week on the economic data front.

While stats included building consent and business confidence figures, the focus was on the business confidence figures.

A marginal improvement in business confidence did little to support the Kiwi, however.

In July, the ANZ Business Confidence Index rose from -34.4 to -31.8.

According to the latest ANZ Report,

  • A net 9% of firms expect weaker economic activity in their own business, rising from -26% in June.
  • The retail sector drove the recovery, while the agriculture sector was the most negative.
  • 31% of firms say they intend to lay off staff, and 24% say they have less staff than a year ago.

For the Japanese Yen

It was a relatively quiet week on the economic calendar.

Retail sales continued to fall in June. Following a 12.5% slump in May, retail sales fell by 1.20%.

Industrial production delivered hope, however, rising by 2.7% in June, according to prelim figures. In May, production had tumbled by 8.9%.

A weakening U.S Dollar stemming from particularly dire economic data and a dovish FED supported the Yen.

The Japanese Yen rose by 0.29% to end the week at ¥105.83 against the Greenback. A 1.05% slide on Friday, cut the gains from earlier in the week. In the week prior, the Yen had risen by 0.82%.

Out of China

It was a quiet week on the economic data front.

July’s NBS private sector PMI figures delivered mixed results on Friday.

While the Non-Manufacturing PMI slipped from 54.4 to 54.2, the Manufacturing PMI rose from 50.9 to 51.1.

With Beijing and Washington silent, following the previous week’s diplomatic spat, the Yuan recovered to sub-CNY7 levels.

In the week ending 24th July, the Chinese Yuan rose by 0.62% to CNY6.9752 against the Dollar. In the week prior, the Yuan had fallen by 0.37%.

The CSI300 rallied by 4.20%, while the Hang Seng falling 0.45%, as a 2nd wave of the pandemic hit HK.

US Stock Market Overview – Stocks Close Higher to Close out the Month on an Up Note

US stocks moved higher on Friday as the Nasdaq roared higher. Better than expected earnings from Apple, Amazon and Facebook helped buoy the Nasdaq. Apple shares soared more than 10% as iPhone 11 sales surged. Facebook was up more than 7%, as both the top and bottom-line beat expectations. All sectors in the S&P 500 index were lower, led down by losses in cyclicals. The technology was the best performing sector. Personal spending rose more than expected, and inflation ticked up slightly. Crude oil prices edged higher following news that the oil rig count declined by one rig.

Personal Spending Rose

Consumer spending, rose 5.6% last month after a record 8.5% jump in May as more businesses reopened. Expectations had been for consumer spending to rise by 5.5% in June. When adjusted for inflation, consumer spending increased 5.2% last month after surging 8.4% in May. Personal income dropped 1.1% last month after decreasing 4.4% in May. Wages increased 2.2% after rebounding by 2.6% in May. The saving rate fell to a still-high 19% from 24.2% in May.

Inflation edged higher in June

Monthly inflation ticked up in June, driven by food and energy goods and services prices, though the trend remained muted. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2%, matching May’s gain. On a year over year basis, the core PCE price index increased 0.9% after rising 1.0% in May.

Stimulus Bill Hits a Road Block

Negotiators on the next coronavirus relief bill hit a roadblock Friday and have not been able to reach a middle ground. Underscoring the gulf between Democrats and Republicans as they try to boost an economy. The current $600 per week enhanced federal unemployment benefit lapses on 7/31. After last-ditch efforts to pass an extension failed Thursday, the Senate left for the weekend.

Crude Oil Weekly Price Forecast – Crude Oil Markets Pullback for the Week

West Texas Intermediate

The WTI Crude Oil market fell a bit during the course of the week, as we continue to see a lot of noise in general. The negative candle for the week does not suggest much though, because quite frankly it is still well within the range of the last several weeks, so I think we will simply grind sideways more than anything else. Having said that, if we were to break down below the 20 week EMA underneath, then we probably could drop down to $35, possibly even $30. On the other hand, we break above the 50 week EMA, then we are probably going to the $49 level. Short-term trading is preferred at the moment though.

WTI Oil Video 03.08.20

Brent

Brent markets went back and forth during the course of the week to form a bit of a bullish candlestick, counteracting the shooting star from the previous week. With that being the case, it is likely that we are going to be stuck in a range between $45 and the 20 week EMA underneath. Short-term trading back-and-forth continues to work, and it probably will be the case for some time. Ultimately, the volatility is going to pick up and is going to continue to be very noisy. That being the case, we do not quite have the argument for a longer-term trade yet, but if we break significantly above the $45 level then it is time to start buying. If we break down below the 20 week EMA, then it is time to start selling.

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

Crude Oil Price Forecast – Crude Oil Markets Continue to Dawdle

WTI Crude Oil

The West Texas Intermediate Crude Oil market has fallen just a little bit during the trading session on Friday, as we are now just below the 20 day EMA. The 50 day EMA is sitting underneath though, so it should continue to cause support. I think there is a reasonable “zone of support” city between these moving averages, and as a result I do believe that buyers will come back sooner or later. The US dollar has strengthened a little bit so that has put downward pressure, but at the end of the day the US dollar is in the cyclical downtrend, so that continues to lift at the same time. Expect choppy trading in general but I think it is only a matter of time before we the previous levels.

Crude Oil Video 03.08.20

Brent

Brent markets also look a bit lackadaisical to say the least, as we are hovering right around the 20 day EMA. The 50 day EMA sits underneath, offering a “zone of support” as well, and therefore I think it is only a matter of time before the buyers get involved here as well. The $45 level is an obvious resistance barrier, not only because it is a large, round, psychologically significant figure, but it is also the top of the gap that is so prevalent on this chart. Because of this, I think we continue to bounce around in this general vicinity and we will eventually have to make a bigger move. In the short term, simply trading back and forth seems to be the best way.

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

Oil Remains Under Pressure As Virus-Related Restrictions Pose Risk For Oil Demand

Oil Video 31.07.20.

New Coronavirus-Related Restrictions Put Quick Oil Demand Recovery Under Question

Yesterday, WTI oil tried to settle below the $40 level as traders turned their attention to the worsening situation on the coronavirus front.

However, weaker U.S. dollar provided material support for oil which managed to return back above $40.

Today, oil is once again under pressure as market participants evaluate multiple headlines which are telling the world that a new round of coronavirus restrictions is just behind the corner.

UK Prime Minister Boris Johnson had to postpone the next stage of reopening as the number of new coronavirus cases increased.

Australia’s Victoria state, which suffers from the second wave of the virus, has signaled that it was ready to introduce new restrictive measures as the number of new infections remained high.

Poland also thinks about new restrictions for those regions of the country that have problems with containing the disease.

Germany introduced a qurantine for people returning from Spain’s Catalonia – an additional blow to Spain’s tourism sector.

As various countries are thinking about reimposing some of virus containment measures, the speed of oil demand recovery is under question.

Obviously, no country in the world will be able to absorb an economic hit from a second full lockdown so such scenario is impossible.

However, postponement of reopenings or introduction of additional restrictive measures is a serious obstacle on oil’s way to higher levels.

In addition, current problems with negotiations regarding the new U.S. coronavirus aid package add to traders’ worries.

Spread Between Front-Month Contract And Longer-Dated Contracts Starts To Increase

In a sign of potential glut, the spread between the front-month September 2020 contract and longer-dated contracts has started to increase for both WTI and Brent.

It looks like traders are worried that OPEC+ decision to increase production by 2 million barrels per day (bpd) comes at an unfortunate time as demand remains rather weak due to continued spread of coronavirus.

For example, the spread between the WTI September 2020 contract and the March 2021 contract is almost $2. The same difference is seen between Brent September 2020 and March 2021 contracts.

At this point, WTI oil is at important crossroads since it can stay near the $40 level or dive below the recent trading range, starting a new near-term downside trend under the weight of surging coronavirus cases.

In this situation, the upcoming trading sessions may set the tone for the whole month of August.

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

Oil Price Fundamental Daily Forecast – Higher for Month, but Demand Destruction Worries Cap Gains

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Friday after a steep fall the previous session changed the main trend to down on the daily chart. Nonetheless, the markets were able to bounce back throughout the session, finishing just under four-month highs.

Despite the late volatility, the markets remain on track to post solid monthly gains, mostly benefiting from a weaker U.S. Dollar which continued to be hit by concerns over the recovery of the U.S. economy as the coronavirus ravages economic output. A falling dollar tends to increase foreign demand for dollar denominated crude oil.

At 12:59 GMT, September WTI crude oil is trading $40.37, up $0.45 or +1.13% and December Brent crude oil is at $44.12, up $0.18 or +0.41%.

The price action toward the end of the week clearly shows that investors are becoming more concerned about demand.

Oil Set for Fragile Recovery as Economies Limp Towards Normal:  Reuters Poll

A Reuters poll released on Friday showed that oil prices are set for a slow crawl upward this year as the gradual easing of coronavirus-led restrictions buoy demand, while a potential second COVID-19 wave could slow the pace of recovery.

The survey of 43 analysts and economists forecast benchmark Brent crude to average $41.50 a barrel in 2020, up slightly from the $40.41 consensus in last month’s survey and compared with around $42 average for the benchmark thus far this year. It is expected to average $49.85 in 2021.

The 2020 outlook for West Texas Intermediate rose to $37.51 per barrel from June’s $36.10.

The poll projected global demand to contract by between 7.2 and 8.5 million barrels per day (bpd) this year, versus last month’s 6.5-8.7 million bpd prediction. The International Energy Agency raised its 2020 demand forecast earlier this month to 92.1 bpd.

Short-Term Outlook

Prices could remain essentially rangebound over the near-term until major strides are made on the demand side of the crude oil equation. On the supply side, things seem to be moving in the right direction with the extension of the OPEC+ production cuts although they are expected to be tapered from August 1 until the end of the year.

The problem is with the demand side where uncertainty rages over whether the re-opening of the global economy will be impeded.

It seems the development of a successful vaccine against coronavirus may be necessary to fast-track an economic recovery and in turn boost oil prices. Without a vaccine, the recovery is likely to be rocky, leading to a series of stops and starts in the next crude oil rally.

Until traders are convinced the recovery in the global economy will be faster and stronger than expected, it’s going to be hard to build a case for a breakout to the upside and the start of a prolonged rally.

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

US Stock Market Overview – Stocks Close Mixed Ahead of Key Large Cap Tech Earnings

US stocks were mixed on Thursday ahead of earnings from the major large-cap tech stocks. After the closing bell, Apple, Amazon, Facebook, and Alphabet are scheduled to release financial results. Most sectors in the S&P 500 index were lower on Thursday led down by energy following a 5% decline in crude oil prices. Technology shares bucked the trend. US GDP tumbled declining nearly 33% year over year which weighed on the US 10-year yield. The yield closed below 55-basis points. US Jobless claims came out in line with expectations rising for the second consecutive week.

US Jobless Claims Rise for Second Consecutive Week

US jobless claims rose to 1.434 million, according to the Labor Department in line with expectations. This was the 19th straight week in which initial claims totaled at least 1 million and the second consecutive week in which initial claims rose after declining for 15 straight weeks.

Q2 GDP Contracts Sharply

Second-quarter GDP plunged the most in history contracting by 32.9% on a year over year basis according to the Commerce Department’s first reading on US growth. Economists had been looking for a drop of 34.7%, which means that despite the decline it was better than expected. With Q1 growth down 5% this number officially put the US economy in a recession. This news is not good for the incumbent President. No president in modern history has won reelection while there was a recession.

Personal consumption, subtracted 25% from the Q2 total, with services accounting for nearly all that drop. Prices for domestic purchases, known as the GDP deflator fell 1.5% for the period, compared with a 1.4% increase in the first quarter. The personal consumption expenditures price index dropped 1.9% after rising a tepid 1.3% in Q1. Excluding food and energy, the core PCE was off 1.1%.

Crude Oil Price Forecast – Crude Oil Markets Selloff

WTI Crude Oil

The West Texas Intermediate Crude Oil market has sold off a bit during the trading session to break down below the $39 level. Ultimately, this is a market that had desperately been looking for some type of momentum, and it looks as if it may finally have found it. It is to the downside but there is also the 50 day EMA underneath that should continue to offer support as well. With that in mind, I fully anticipate that we will probably see some type of support, but if we were to break down below the 50 day EMA we will more than likely approach the $35 level eventually.

Crude Oil Video 31.07.20

Brent

Brent markets were of course behaving the same way, breaking down significantly as well. Ultimately, this is a market that has been stuck in a range and even though we have seen a lot of momentum during the day shift to the downside, I think it is only a matter of time before recover again. Looking at the chart, the 50 day EMA seems to be offering a little bit of support, so I like the idea of perhaps buying this dip.

Longer-term, I think that oil still have to figure out what it wants to do and therefore you can expect more volatility but it is clear that we have quite a bit going on from the technical analysis standpoint to continue causing headaches for traders who are looking for bigger moves. For what it is worth, the Americans seem to be buying crude oil based upon value more than anything else.

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

Oil Slides Below $40 But Quickly Finds Support

Oil Video 30.07.20.

Coronavirus In Spotlight Again

For several months, oil managed to ignore the steady increase in the number of new coronavirus cases in the world and stayed near the $40 level.

Today, WTI oil has moved below the $40 mark in what could be the most serious attempt to gain more downside momentum.

The virus situation continues to get worse, and some countries are reimposing virus containment measures to fight against the second wave of the disease.

Notably, UK has stated that it was worried about the second wave of coronavirus in Europe and added that it may impose quarantine measures on more countries.

At this point, Spain is the only EU country in the UK quarantine list, and UK travellers to Spain have to self-isolate for 14 days after arrival.

Such measures are a death blow to the fragile rebound in tourism – and to the related rebound in air travel.

Another source of worry is OPEC’s decision to increase oil production by 2 million barrels per day (bpd) in August. This increase may come at unfortunate time if oil demand recovery stalls due to the spread of coronavirus.

Yesterday’s inventory report provided some hopes that oil demand recovery would ultimately put pressure on inventories. However, oil traders will likely wait for a decisive downside trend in crude inventories before pushing oil prices above the recent highs at $42.50.

Despite Coronavirus Worries, Oil May Still Repeat The Pattern Seen In The Last Few Months

Following the historic meltdown in April which took WTI futures into the negative territory, oil was able to reach the $40 level in June and continued to stay near this level for 2 months.

During this time, oil made three attempts to settle below the $40 level but each attempt was met with increased buying activity.

While the continued problems on the coronavirus front may prevent oil from developing significant upside momentum, a serious move below the $40 level may demand additional negative catalysts.

The main problem for the potential bear move is that OPEC+ deal has stabilized the market situation and eliminated fears of running out of the storage space.

The timing of oil demand recovery is, of course, important for near-term oil price dynamics but the market is focused on the future, and the ultimate rebound of oil demand is inevitable. This fact may limit oil’s losses even in case the virus situation gets worse.

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

Oil Price Fundamental Daily Forecast – Pressured by COVID Driven Fuel Demand Worries

U.S. West Texas Intermediate and international-benchmark crude oil futures are trading sharply lower on Thursday as a jump in coronavirus infections around the world raised fears a rebound in fuel demand would stagnate just as major oil producers are set to raise output in August.

The market opened slightly lower on worries over demand, put started its plunge after Reuters reported that Iraq increased oil exports in July, while pumping above the OPEC+ target.

At 11:08 GMT, September WTI crude oil is trading $40.51, down $0.76 or -1.84% and December Brent crude oil is at $44.20, down $0.63 or -1.41%.

Oil Inventories Plunge, but Fuel Inventories Rise Against Expectations

Wednesday’s U.S. Energy Information Administration (EIA) weekly inventories report revealed exactly what traders are worried about. The market is trading lower despite an unexpected plunge in crude oil inventories. This is because a rise in fuel stocks indicated that demand is struggling due to the spread of coronavirus. Consumers are driving less, weighing on gasoline prices and flying less, putting pressure on distillates like jet fuel.

According to the U.S. Energy Information Administration (EIA), crude inventories fell by 10.6 million barrels in the week to July 24 to 526 million barrels. Analysts were looking for a 1 million barrel build.

Net U.S. crude imports fell 1 million barrels per day, the EIA said, dropping to 1.9 million bpd. More importantly, U.S. gasoline stocks rose by 654,000 barrels, the EIA said, compared with forecasts for a 733,000-barrel drop. Distillate stockpiles also jumped by 503,000 barrels, versus expectations for a 267,000-barrel drop, the EIA data showed.

Iraq Increases Oil Exports in July, Pumps Above OPEC+ Target

Iraq’s crude oil exports have increased so far in July, shipping data showed and industry sources said, suggesting OPEC’s second-largest producer is still undershooting its production cut target under an OPEC-led deal.

Daily Forecast

The short-term outlook is bleak with demand for fuel falling and OPEC+ preparing to taper its production cuts. Both combine to produce a bearish outlook for crude oil prices.

The selling pressure could accelerate over the near-term due to demand concerns with COVID-19 infections increasing and raising the prospects for lockdowns to be reimposed.

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

Crude Oil Price Update – Oil Inventories Plunge but Gains Capped by Jump in Refined Products

U.S. West Texas Intermediate crude oil futures finished higher on Wednesday after a government report showed U.S. crude oil stockpiles fell by nearly 11 million barrels last week as imports dropped. This news would have normally sent prices sharply higher, but during the coronavirus pandemic, things are not normal. Gains were capped because low COVID-19 driven demand led to a rise in product inventories.

At 23:46 GMT, September WTI crude oil is trading $41.28, up $0.01 or +0.02%.

According to the U.S. Energy Information Administration (EIA), crude inventories fell by 10.6 million barrels in the week to July 24 to 526 million barrels. Analysts were looking for a 1 million barrel build.

Net U.S. crude imports fell 1 million barrels per day, the EIA said, dropping to 1.9 million bpd. More importantly, U.S. gasoline stocks rose by 654,000 barrels, the EIA said, compared with forecasts for a 733,000-barrel drop. Distillate stockpiles also jumped by 503,000 barrels, versus expectations for a 267,000-barrel drop, the EIA data showed.

Daily September WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend will change to down on a trade through $40.48. A move through $42.51 will signal a resumption of the uptrend.

The minor range is $39.97 to $42.51. The market straddled its 50% level at $41.24 most of the session.

The main retracement level resistance is $41.72. This is a long-term 50% level.

The short-term range is $37.32 to $42.51. Its 50% level at $39.26 is support.

Daily Swing Chart Technical Forecast

Based on the early price action the direction on Thursday is likely to be determined by trader reaction to the minor pivot at $41.24.

Bullish Scenario

A sustained move over $41.24 will indicate the presence of buyers. This could trigger a rally into the major 50% level at $41.72. Overtaking this level will indicate the buying is getting stronger with the next target $42.51.

Bearish Scenario

A sustained move under $41.24 opens the door to a possible retest of this week’s low at $40.48. The trend changes to down on a trade through this bottom. This could lead to a test of the next main bottom at $39.97, followed by a 50% level at $39.26.

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

Technical Patterns, Future Expectations and More – Part II

Continuing this multi-part research article, today we are going to explore some more immediate (shorter-term) technical setups.  If you missed the first part of this research article, please take a minute to review it before continuing because there is quite a bit of information and related article links that are very important for you to understand this next article. You can view it here.

In the first part of this article, we discussed how our team evaluates a proper market perspective and how we build a consolidated narrative for our subscribers.  Some times, it is not easy for us to build a suitable narrative or decide on risk factors as our team may not completely agree with one another.  At times like this, we’ll often decide that no action is better than taking any action at all.  Generally, though, our team is able to adopt a consensus narrative related to portfolio allocation levels, general market trends and specific target trade setups for the next 5 to 10+ trading days.

The Technical Traders services’ primary objective is to protect assets while attempting to deliver success with trading signals that generate consistent profits.  We care, very deeply, about our members and their success.  Our team has a combined experience in the markets of over 55+ years, and have lived through various market and economic scenarios going back over 35+ years. We have also had the opportunity to learn from some of the best technicians and analysts on the planet.  We publish our public research for two primary reasons: a) to assist our friends and followers, and b) to publically document our future calls and predictions – putting our necks on the line every time we publish anything to the general public.

When we develop a narrative for our members, we internally discuss longer-term and shorter-term expectations as well as to identify concerns or risks that we see as evident in the markets or setups that are present today.  As we suggested in Part I of this article, we don’t try to over trade and are very selective in our trades. We also have processes in place to ensure we have found the right risk /reward ratio prior to initiating new trades.  If we miss a move – we won’t chase it – there will always be other trades setting up for us to capture new profits for our members. We see some interesting events unfolding that will undoubtedly lead to some fantastic trades.

PUT/CALL RATIO SHOWS SELLERS LINING UP

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The chart above highlighting the PUT/CALL ratio suggests sellers are lining up near recent highs, expecting the markets to roll over as the Q2 earnings and data are released.  It makes sense that the data could be somewhat bearish in nature given the potential destruction of earnings and revenues in Q2.  It also makes sense that near recent highs, as the S&P 500 and Dow Jones have recently rolled into a sideways consolidation, that skilled traders would pull profits near these levels and initiate new Put Options trades to hedge any downside risks in the future.

Gold and Silver recently fired a very large warning shot for anyone paying attention.  The US Dollar has continued to weaken and Crude Oil may begin a new downside price trend if the economic data suggests a broader contraction in the US economy.  What all this means is that skilled traders and others are losing their bullish bias in the markets and are starting to become protective – expecting some type of new trend to setup.

Our researchers believe a downside price move targeting the $252 level on the SPY is not out of the question. Recall the $252 level is a price level that corresponds with economic expectations as of late 2017.  These levels represent a fairly nominal price correction that would still be considered moderate bullish overall.  Any deeper price move would indicate the markets are completely disconnected with future expectations for the rest of the year and possibly further out into the future.

VIX BACK AT FEBRUARY FEAR LEVELS

The VIX is trading at levels that indicate the level of fear in the markets has recovered to historically moderately high levels (near 25.00) – see the chart below.  Volatility is still a major factor in the markets and any change in trend could be aggressive and violent – sending VIX above 40.00 again.  We believe this new low level in the VIX is indicative of complacency in the markets and with the current bullish price trend.  Complacency in the markets tends to lead to very aggressive price corrections.  We believe skilled technical traders should adopt a very cautious stance going forward and protect open long positions exposed to risk.

A screen shot of a computer Description automatically generated

If the markets begin to breakdown on the Q2 GDP and Consumer data that will be released on Thursday, July 30, 2020, then the VIX will begin to move dramatically higher. In this situation, stop levels just below the current market price levels will begin to become targets.  We can also expect to experience a similar event as that of February 2020, a type of flash-crash where a -12 to -18% downside price move could happen over a matter of days – not weeks.

Pay attention to what happens in the Transportation Index and with Crude Oil and Gold and Silver.  Our researchers follow these as early warning triggers for what may come.  Additionally, our cycle research suggests a bottom in the markets will likely form in 2022 to 2023 – thus we may have quite a bit of sideways or downside price action ahead of us before a true market bottom completes.  At this point, in order for our cycle research to become valid, we would need to see a downside price move that substantiates the cycle predictions.

Right now, the advice we continue to provide to our members is to be patient, protect your profits and assets, and prepare for more volatility and risks.  This is not the time to play games with your capital and we strongly believe this is not the time to “buy the dips”.  A bigger price pattern is setting up in the markets and many traders simply ignore these broader technical patterns.  You can read more about these types of patterns in one of our recent research posts that explains the selloff structure. You can also see why we think gold will break out and silver will go ballistic once the stock market bottoms.

We hope you’ve found this multi-part research article helpful and informative.  Remember, read our research and determine if you like and agree with our conclusions.  Even if you don’t agree, pay attention to what we are suggesting.  You never know, it might lead you to make a decision that could help you protect your assets, find a new opportunity or, at the very least, help to keep you better informed – and that is our ultimate goal.  We put this effort into publishing these public research articles every day to help you stay ahead of the biggest moves in the markets.

See the articles listed above and read them to learn more about how we see the future unfolding. We believe you won’t find any better research or analysis anywhere on the web than what we offer and we urge you to take advantage of our member/subscriber services when you are ready.  The next 24 months are going to be really crazy – get ready for some really great opportunities.

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.

Crude Oil Price Forecast – Crude Oil Markets Continue Sideways March

WTI Crude Oil

The West Texas Intermediate Crude Oil market has been doing nothing for days, and of course Tuesday was no different. Ultimately, this is a market that I think will find plenty of reasons to go higher, if for no other reason than the Federal Reserve working against the value of the US dollar. There is an old adage that says, “never short a quiet market”, and I think that might be coming into play here relatively soon. That being said, I buy short-term dips, but I am not looking for major moves yet. If we can get an explosive candlestick to the upside, then it is likely that we will see a follow-through towards the $49 level.

Crude Oil Video 30.07.20

Brent

Brent markets of course have also been very quiet as the world tries to figure out whether or not demand is ever going to come back. Having said that, they did have a little bit more bullish pressure during the day than WTI did, and we still have not filled the gap quite yet nor have we touched the 200 day EMA in this grade. It is because of this that I believe that the Brent market may outperform the WTI, at least in the short term. Longer-term, they tend to move in the same direction anyway, but I think what we are seeing here is the market trying to figure out whether or not the falling US dollar is reason enough to go higher. To the downside, the red 50 day EMA on the chart continues to offer plenty of support.

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