US Stock Market Overview – Stocks Whipsaw and Close Mixed Despite Mixed Economic Data

US stocks whipsawed between positive and negative territory ahead of the President’s press conference where he denounced Chinese actions. President Trump called COVID-19 the Wuhan virus, antagonizing the Chinese leadership. The Chicago PMI numbers came in worse than expected showing that manufacturing in the mid-west remains weak. The US personal savings rate hit a historic high, while spending tumbled. The Dow closed lower on the session while the S&P 500 and Nasdaq closed in the black. Sectors in the S&P 500 index were mixed, led higher by technology, real-estate was the worst-performing sector.

Total Energy Rigs Decline Buoying Oil

Oil prices rose into the close, climbing 5.6% for the week. Prices rose on Friday following a report from Baker Hughes which showed that the number of active U.S. rigs drilling for oil declined by 15 to 222 this week. The oil-rig count has now fallen for 11 weeks in a row, suggesting further declines in domestic natural gas output. The total active U.S. rig count, meanwhile, also fell by 17 to 301, according to Baker Hughes.

Manufacturing Declines

The Institute of Supply Management reported that the May Chicago PMI came in at 32.3 versus expectations it would rise to 40.0. This compares to 35.4 in April. That’s the weakest since 1982. Among the main five indicators, order backlogs and supplier deliveries saw the largest declines.

Personal Spending Falls while Savings Rise

The commerce department reported that the personal savings rate hit a historic 33% in April. The previous record savings rate was 17.3% in May 1975. U.S. consumer spending, the U.S. economy’s main engine, fell by a record 13.6% in April during coronavirus lockdowns, but there are signs that purchasing is slowly creeping up. Personal income, which includes wages, interest and dividends, increased 10.5% in April,. The jump reflected a sharp rise in government payments through federal rescue programs, primarily one-time household stimulus payments of $1,200.

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

Crude Oil Weekly Price Forecast – Crude Oil Continue to Reach Towards Gap

WTI Crude Oil

The West Texas Intermediate Crude Oil market has gone back and forth during the week, as we continue to see a lot of noise in general. That being said, the market is likely to continue seeing resistance just above as it is the beginning of the massive gap that continues to be one of the biggest technical areas on the chart. I think that we probably will eventually break out to the upside and then go looking towards the $41 level above which coincides with the 200 day EMA. I do not expect break above the $41 level.

WTI Oil Video 01.06.20

Brent

Brent markets of course went back and forth during the week, as we continue to see a lot of noise when it comes to the energy market. Quite frankly, this should not be a huge surprise considering that the market has to deal with when it comes to demand and of course questions as to whether or not some of the members of OPEC plus will continue to keep the production cuts and play. At this point, I think that we probably go looking towards the $40 level, and then possibly even break above there to go looking towards the $45 level.

All things being equal, we could pull back to the $30 initially, so with that it is possible that the buyers will come in based upon value at that point. If we did break down below the $30 level, then it means we get another leg lower. All things being equal, the market is likely to be positive though, it just simply because we need to fill that gap.

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

Crude Oil Price Forecast – Crude Oil Markets Continue to Press Gap

WTI Crude Oil

The West Texas Intermediate Crude Oil market initially fell during the trading session on Friday but turned around to show signs of strength again. The gap is sitting just above here and therefore it is likely that technical traders will trying to find a reason to push into this area. Filling the gap is a common trade, and clearly the fact that we continue to find buyers on dips suggests that we are going to eventually find the momentum necessary. The top of the gap is near $41, and I think that is about as far as this market can go.

Crude Oil Video 01.06.20

Brent

Brent looks similar, but it has not reached the exact bottom of the gap, so it may have a little bit more of a fight ahead of it. Ultimately though, I do think that the market will make a decision and try to take off to the upside. I like buying dips, lease for the short term and until we get some type of major change in attitude what I consider shorting. Going into the weekend, it looks like we are still trying to find plenty of buyers to finally push higher, but ultimately this is a lot of back and forth, simply waiting for the next catalyst to get things going. I do believe that the 50 day EMA comes into play in both of these markets, at least for dynamic support. Expect volatility, so keep your position size relatively small until we get some type of clarity in these markets.

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

Oil Mixed As Traders Hope For Extension Of Current Production Cuts

Oil Video 29.05.20.

U.S. Domestic Oil Production Drops By 100,000 Barrels Per Day

Oil remains under some pressure as the EIA Weekly Petroleum Status Report showed that crude oil inventories increased by 7.9 million barrels per day (bpd).

Gasoline inventories decreased by 0.7 million bpd while distillate fuel inventories increased by 5.5 million bpd. In general, the report painted a picture of a rather weak demand for oil.

Meanwhile, the U.S. oil production declined from 11.5 million bpd to 11.4 million bpd. The pace of the domestic production decrease has slowed down but the downside trend is steady.

I’d note that the oil market did not experience any major sell-off after the inventory news because oil is trading at low levels, so bad news are already included in today’s prices.

The previous major downside move which brought the WTI May 2020 contract into the negative territory was caused by the fears of running out of oil storage. Now that such fears have been eliminated, oil will need serious downside catalysts to return back to sub-$30 levels.

Russia And Saudi Arabia Continue To Discuss The Extension Of Existing Oil Production Cuts

The potential extension of the existing oil production cuts is the main topic of this week.

According to earlier reports, Russian Energy Minister Alexander Novak discussed potential oil production cuts with Russian oil companies.

However, another report stated that Russia wanted to increase its oil production in July instead of sticking to existing production cuts.

A new Reuters report suggested that Saudi Arabia wants to keep existing oil production cuts until the end of the year.

The original OPEC+ deal called for production cuts of 9.7 million bpd in May – June, followed by production cuts of 7.7 million bpd until the end of the year.

If the existing production cuts are kept until the end of the year, the oil market will get significant support.

As usual in these discussions about production cuts, Russia’s position may be a problem.

A Reuters report stated that Russia’s leading oil company Rosneft had trouble with supplying its clients with oil due to production cuts and that it wanted to increase production after June.

The next OPEC+ meeting is scheduled for June 10 so we’ll soon learn whether Saudi Arabia and Russia reached consensus regarding production cuts.

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

U.S. Stocks Mixed Ahead Of Trump’s News Conference On China

All Eyes On Trump’s News Conference

U.S. – China relations will be in the spotlight today as the U.S. President Donald Trump is set to unveil the country’s response to the new Hong Kong security law.

The worst-case scenario for the market is a decision to revoke Hong Kong’s special status. China has already warned that it will take any necessary measures if U.S. proceeds with its plans to put more pressure on China.

In turn, Hong Kong stated that the loss of its special status could pose problems for the U.S. economy.

It remains to be seen which measures will be chosen by the U.S. as it has to carefully weigh the impact of any additional pressure on China at a time when the world economy starts to recover from the unprecedented coronavirus crisis.

Personal Income Is Up 10.5% In April

U.S. has just released another portion of economic data.

Personal Income was up 10.5% in April compared to analyst consensus which called for a decline of 6.6%. Most likely, the huge government stimulus is the reason for this development.

Personal Spending was down 13.6% compared to analyst consensus which projected a decline of 12.6%. Not surprisingly, Personal Spending was hit by virus containment measures as consumers had to stay at home.

S&P 500 are flat following the release of new economic reports. Most likely, the market will focus on the above-mentioned press conference and the potential U.S. moves against China as they could have a material long-term impact on the world economy.

Oil Rally Takes A Pause

EIA Weekly Petroleum Status Report confirmed the data published in the API Crude Oil Stock Change report. According to EIA, oil inventories increased by 7.9 million barrels per day.

This means that the pace of the oil demand recovery is not as robust as previously hoped. This data has a direct impact on the oil market and oil-related stocks, but it also provides a chance to evaluate the pace of economic recovery since energy demand and economic activity are closely linked.

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

 

Oil Price Fundamental Daily Forecast – Worsening US-China Relations Likely Source of Impending Volatility

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Friday with prices dragged down by weak U.S. fuel demand, fears of a second wave of coronavirus cases in South Korea and a worsening in U.S.-China relations. Nonetheless, the markets remain on track for a hefty monthly gain.

At 11:55 GMT, July WTI crude oil is trading $32.85, down $0.86 or -2.55% and August Brent crude oil is at $35.28, down $0.75 or -2.08%.

Both futures contracts are also in a position to post their first weekly loss after four consecutive weeks of gains that leave them set for the biggest monthly gains in years thanks to production cuts and optimism over Chinese-led demand recovery, analysts said.

WTI is on track for a record monthly gain of 72% in May, with Brent set for a 35% increase that would represent its strongest monthly rise since March 1999, Reuters said.

There are headwinds, however, which is likely the reason behind this week’s abrupt halt of the current rally.

“The global reaction to China’s move to propose new security laws for Hong Kong continues to increase, while there’s a score of new COVID-19 cases in South Korea,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugend.

U.S. President Donald Trump is due to announce his response to the situation in Hong Kong later on Friday. His announcement is likely to be the source of volatility later in the session.

Despite US-China Issues, There are Positives

Thursday’s data from the Energy Information Administration (EIA) showed that U.S. crude oil and distillate inventories rose sharply last week. Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.

However, storage in Cushing, Oklahoma, the main delivery point in WTI, decreased by 3.4 million barrels, and refinery utilization also rose to 71% from 69%.

Additionally, producers have scaled back output at a record pace as plunging prices made operation uneconomical. OPEC and its oil-producing allies agreed to the steepest production cut in history during an extraordinary, multi-day meeting in April. Then, earlier in May, Saudi Arabia said that, beginning June 1, it would voluntarily cut an additional 1 million bpd, on top of its portion of the cuts agreed to by OPEC+. Kuwait and UAE were among the other cartel members that followed suit and said they would also exercise additional cuts.

Daily Forecast

The wild price swings seem to be behind us, but the market is still vulnerable to a steep retracement of the recent rally. Traders are now waiting for the next OPEC+ meeting to set the longer-term tone. However, over the short-run Trump’s announcement regarding China’s influence in Hong Kong is likely to set the tone. We’re looking for a near-term correction of the recent rally.

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

Brent Oil and Gold With Interesting Setups

In today’s analysis, we will focus on commodities: Gold and Oil. In the previous months, Gold was climbing has been mostly moving higher and oil has been declining. Despite the most recent rise in the price of Brent and a small decline in the price of gold, we think that we are about to see a comeback to the dominant trend. In both cases, gold has a nice bullish signal and oil is drawing rather bearish pattern.

First, lest start with Brent Oil, where its price has doubled since the end of April. In the last two weeks, the upswing stopped and the price is creating a head and shoulders pattern. The price is creating the right shoulder of the pattern. The main up trendline was already broken but the neckline is still intact. In this case, the price breaking the neckline can be a nice selling opportunity.

The second instrument is Gold, where the price is currently breaking the upper line of the flag formation. The flag was a correction in the bullish trend, so it promotes another wave up. The real, legitimate buy signal will be triggered, when the price will break the horizontal resistance at 1735 USD/oz.

The last instrument is not a commodity but the USDJPY pair which is definitely worth mentioning. This Friday is crucial for this pair as the price has managed to escape from the recent sideways trend. Sellers broke two up trendlines and the lower line of the rectangle pattern. Currently, we are testing this last support as a resistance. The test so far is positive for sellers, which may indicate a willingness for a further slide. Sentiment here is negative.

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

Economic Data to Take a Back Seat with Trump’s News Conference the Main Event

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Japanese Yen and Aussie Dollar were in action early in the day.

Away from the economic calendar, the markets responded to Trump’s announcement on Thursday of plans to unveil measures against China at the news conference later today.

Fiscal stimulus from Brussels and the easing of lockdown measures across the EU and the U.S had provided support to riskier assets ahead of today’s open.

Looking at the latest coronavirus numbers,

On Thursday, the number of new coronavirus cases rose by 112,124 to 5,900,627. On Wednesday, the number of new cases had risen by 110,221. The daily increase was higher than both Wednesday’s rise and 106,139 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 5,612 new cases on Thursday, which was up from 1,892 new cases on Wednesday. On the previous Thursday, 1,976 new cases had been reported.

From the U.S, the total number of cases rose by 22,413 to 1,768,216 on Thursday. On Wednesday, the total number of cases had risen by 20,392. On Thursday 21st May, a total of 28,089 new cases had been reported.

The uptick on Thursday will need to be monitored in the coming days. With the easing of lockdown measures now in the 4th week, it would be in the coming days that a 2nd wave would become evident…

For the Japanese Yen

Inflation was in focus in the early part of the day, along with industrial production and retail sales figures.

In May, the Ku-area of Tokyo saw inflationary pressures return, with core consumer prices rising by 0.20% In April, consumer prices had fallen by 0.10%, year-on-year.

According to the Ministry of Internal Affairs and Communication.

  • Rising prices for clothes & footwear (+1.7%), furniture & household utensils (+1.7%), and culture & recreation (+1.2%) supported the rise.
  • There were also increases in prices for medical care (+0.8%) and housing (+0.7%).
  • Prices for Education (-8.9%) and fuel, light, & water charges (-1.9%) pinned back inflationary pressures, however.
  • There were also declines in prices for transport & communication (-0.1%) and miscellaneous (-0.8%).

In April, industrial production slumped by 9.1%, based on prelim numbers, following a 3.7% decline in March. Economists had forecast a 5.1% slide.

According to the Ministry of Economy, Trade, and Industry,

Industries that mainly contributed to the decrease were:

  • Motor vehicles, iron, steel & non-ferrous metals, and transport equipment (excl. motor vehicles).

Industries that mainly contributed to the increase were:

  • Production machinery.

Forecasts for May were not much better, with the forecast for industrial production revised from -1.4% to -4.1%. For June, however, forecasts are for production to rise by 3.9%.

Retail sales also disappointed in April, with lockdown and social distancing measures weighing.

According to the Ministry of Economy, Trade, and Industry, retail sales tumbled by 13.7% in April, year-on-year, following a 4.7% slide in March. Economists had forecasts an 11.50% decline.

The Japanese Yen moved from ¥107.701 to ¥107.608 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.22% to ¥107.41 against the U.S Dollar.

For the Aussie Dollar

Private sector credit stalled in April, following a 1.10% increase in March.

According to figures released by RBA,

  • Business credit rose by 0.1%, following a 3.1% rise in March.
  • Personal credit slid by 3.0%, following a 1.4% decline in March.
  • Housing credit rose by 0.2%, which was down from a 0.3% rise in March.

The Aussie Dollar moved from $0.66312 to $0.66315 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.08% at $0.6642.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.11% to $0.6203.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include French and German retail sales figures for April and the Eurozone prelim inflation numbers for May.

Prelim inflation figures for France and Italy and 2nd estimate GDP numbers for France are also due out.

We will expect the numbers to have a muted impact on the EUR, however. The EU’s recovery plan and the continued easing of lockdown measures remain positives.

While COVID-19 news and updates remain EUR positive, the markets will need to monitor the number of new cases. On Thursday, there was an uptick. If an upward trend begins, this could question member state plans to ease lockdown measures further.

From the early part of the day, it was risk aversion that pinned back the EUR as the markets await Trump’s news conference later today.

At the time of writing, the EUR was up by 0.07% to $1.1085.

For the Pound

It’s yet another quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

Through the day, expect market risk sentiment and any Brexit chatter to be key drivers.

At the time of writing, the Pound was up by 0.01% to $1.2322.

Across the Pond

It’s another busy day ahead on the U.S economic calendar. Economic data includes April inflation and personal spending figures and May consumer sentiment and Chicago PMI numbers.

Expect the May figures to have the greatest influence, with the markets likely to brush aside April numbers.

Outside of the numbers, FED Chair Powell is scheduled to speak. Any commentary on the U.S economy and monetary policy will garner plenty of attention.

The main event of the day, however, is Trump’s news conference. What does the U.S President have in store for China?

The Dollar Spot Index was up by 0.02% to 98.407 at the time of writing.

For the Loonie

It’s also a busy day on the economic calendar. Key stats include 1st quarter GDP numbers and April’s RMPI.

Expect the GDP figures to have some influence, though the markets are expecting some quite dire numbers. Anything better than forecast should be Loonie positive…

Crude oil prices and market risk sentiment will be the key driver on the day, however.

At the time of writing, the Loonie was down by 0.10% to C$1.3777 against the U.S Dollar.

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

US Stock Market Overview – Stocks Closed Lower as China Concerns Rise

US stocks moved lower Thursday as worse than expected economic data, reversed the trend in the S&P 500 index. President Trump announced that he planned to have a press conference on Friday that would discuss issues related to China. That took the wind out of the sales of investor sentiment. GDP contracted by more than expected, Durable Goods Orders tumbled as demand for transportation equipment collapsed. Initial jobless claims have decelerated but it still climbed by 2.1 million. Most sectors in the S&P 500 index were lower, despite the rally in the broader markets. Utilities were are defensive, were the best performing sector, cyclical bucked the trend. US yields were nearly unchanged on Thursday while oil prices rose following news that oil production continued to decline in the US. This helped buoy energy shares.

GDP Shrank More than Expected

GDP which is the broadest measure of economic health, fell at an annual rate of 5% in the Q1 a bigger decline than the 4.8% drop first estimated a month ago. It was the biggest quarterly decline since an 8.4% fall in the fourth quarter of 2008.

Durable Goods Orders Fell

US durable goods, plunged 17.2% in April after dropping 16.6% in March. Demand for transportation equipment collapsed by 47.3%. New orders of capital goods tumbled in April and shipments declined. Orders for non-defense capital goods excluding aircraft, which is a proxy for business spending, dropped 5.8% last month, according to the Commerce Department. Data for March was revised lower to show these so-called core capital goods orders falling 1.1% instead of dipping 0.1% as previously reported. Expectations had been for core capital goods orders diving 10.0% in April. Core capital goods orders dropped 1.3% year over year in April.

Jobless Claims Rise

Initial jobless claims totaled 2.1 million last week, the lowest total since the coronavirus crisis began. Expectations were for 2.05 million. The total represented a decrease of 323,000 from the previous week’s upwardly revised 2.438 million. Continuing claims, numbered 21.05 million, a clearer picture of how many workers are still sidelined. That number dropped sharply, falling 3.86 million from the previous week.

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

Crude Oil Price Update – Reaction to $32.77 Pivot Sets the Tone into the Close; EIA Says Crude Stocks Rose

U.S. West Texas Intermediate crude oil futures are trading marginally lower at the mid-session on Thursday following the release of government report that showed a surprise increase in U.S. crude stocks, which offset hopes for a demand recovery as coronavirus lockdowns ease.

According to the U.S. Energy Information Administration (EIA), U.S. stockpiles rose by 7.9 million barrels the week-ending May 22. Analysts had been expecting a draw of 2.5 million barrels although analysts at FactSet were predicting a 1.3 million barrel draw.

At 14:40 GMT, July WTI crude oil is trading $32.73, down $0.08 or -0.24%.

The market is actually clawing back earlier losses that pushed prices into an intraday low of $31.14. This move was fueled by a surprise build in Wednesday afternoon’s American Petroleum Institute (API) weekly inventories report.

Also weighing on prices was uncertainty about Russia’s commitment to continuing deep output cuts ahead of a June 9 meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through the main tops at $34.81 and $351.8 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through $30.72 will change the minor trend to down. This will shift momentum to the downside.

The main range is $54.86 to $17.27. Its retracement zone at $36.07 to $40.50 is the primary upside target and potential resistance zone.

The minor range is $30.72 to $34.81. Its 50% level at $32.77 should act like a pivot. It is providing resistance early Thursday.

The short-term range is $17.27 to $34.81. If the momentum shifts to the downside then its retracement zone at $26.04 to $23.97 will become the primary downside target area.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $32.73, the direction of the July WTI futures contract the rest of the session on Thursday is likely to be determined by trader reaction to $32.77.

Bearish Scenario

A sustained move under $32.77 will indicate the presence of sellers. If this move creates enough downside momentum then look for a test of the minor bottom at $30.72. This is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over $32.77 will signal the presence of buyers. This could lead to a quick test of $32.98, followed by $34.81.

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

Crude Oil Price Forecast – Crude Oil Markets Continue to Press the Issue

West Texas Intermediate Oil

The West Texas Intermediate Crude Oil market has initially pulled back a bit during the trading session on Thursday, but then turned around to show signs of strength again as continuing optimism floods into the market. That being said, it is quite interesting considering that there is a gap above and it is likely that it will probably get filled given enough time. That does not mean that it will be easy, and I do think that once we get to the top of the gap, closer to the $41 level, there is the 200 day EMA coming into focus there as well, so I think that is about as far as that goes. To the downside, there is plenty of support at the $30 level and of course the 50 day EMA.

Crude Oil Video 29.05.20

Brent

Brent markets have also pulled back slightly but then showed signs of life again as the market continues to see a lot of support based upon the 50 day EMA. Ultimately, this is a market that I think continues to see a lot of noise, but it is choppy to say the least and therefore you have to be overly cautious. The $40 level above starts to begin of a major gap that extends to the $45 level, so it is likely that we could see a bit of interest in trying to fill that as well. To the downside, it is not until we break the $30 level that uncomfortable shorting. Granted, economies are opening but demand is going to be weak.

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

Oil Gains Ground Despite The Increase In Oil Inventories

Oil Video 28.05.20.

Oil Inventories Increase By 8.7 Million Barrels

API Crude Oil Stock Change report showed that oil inventories increased by 8.7 million barrels.

The market was surprised by the sudden increase since the U.S. oil production has been trending down since the beginning of the coronavirus crisis while demand is expected to increase as the economy reopens.

Now, the market will wait for the confirmation of this data in the EIA Weekly Petroleum Status report. If the EIA report confirms that inventories have increased materially, oil may be positioned for more downside.

The continued increase of U.S. – China tensions is also playing against oil. At the same time, oil prices are supported by traders’ hope that the reopening of the world economy will lead to a major increase of oil demand at a time when production is cut thanks to OPEC+ deal and cuts from non-OPEC+ producers.

Oil stays at low levels so the market may shrug off some modest increase in inventories as current pricing reflects challenging market conditions, but oil may find it hard to withstand the pressure of a major increase in inventories in case EIA report confirms the API data.

Does Russia Really Want To Continue Current Cuts Beyond June?

Yesterday, we discussed a report which stated that Russia was evaluating the possibility of extending current production cuts for two more months.

According to the OPEC+ deal, production cuts will decrease from 9.7 million barrels per day (bpd) in May – June to 7.7 million bpd from July to the end of the year.

Bloomberg reported that Russia wanted to increase its oil production in July, in stark contrast with the above-mentioned report. As usual, both reports cited unnamed sources.

While the world economy is reopening, the oil market clearly requires additional support. At the same time, Russia and Saudi Arabia may be reluctant to lend a helping hand to the U.S. shale while both countries have the resources to tolerate $30 – 40 oil for some time.

In a recent phone call, Russia’s Vladimir Putin and Saudi Arabia’s Mohammed bin Salman agreed to coordinate actions in the oil market. It remains to be seen whether such coordination will include the extension of current oil production cuts.

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

U.S. Stocks Mixed After Encouraging Continuing Jobless Claims Report

U.S. Continuing Jobless Claims Report Is Better Than Expected

S&P 500 futures are swinging between gains and losses as traders digest a flurry of economic reports.

U.S. Initial Jobless Claims report showed that 2.1 million Americans filed for unemployment benefits in a week, in line with analyst estimates.

Continuing Jobless Claims were much lower than expected at 21 million. This means that many people who have previously filed for unemployment benefits have found new jobs.

First-quarter GDP Growth Rate  was -5% compared to analyst consensus of -4.8%. Obviously, second-quarter numbers will look much worse as the economy was hit by virus containment measures.

Durable Goods Orders declined by 17.2% month-over-month in April compared to analyst consensus which called for a decline of 19%.

China Approves Hong Kong Security Law

U.S. – China relations are once again in focus as China’s parliament has approved a new security law for the city.

U.S. has already stated that Hong Kong no longer qualified for special treatment under the U.S. law after this move. This creates significant uncertainty for the city’s future as an international financial center.

Currently, there are two main unknown catalysts – the potential U.S. sanctions on China and China’s response in case such sanctions are implemented.

U.S. – China tensions have steadily increased over the last few weeks but the stock market was able to ingore them. It remains to be seen whether any U.S. sanctions on China could hurt the current upside trend in the U.S. stock market.

Oil Inventories Increase Again

Oil is set for a volatile trading session as the API Crude Oil Stock Change report showed that oil inventories increased by 8.7 million barrels per day.

The oil market will be waiting for confirmation of this data in the EIA Weekly Petroleum Status report which is scheduled to be released today after the market open.

The recent oil rally was a material contributor to the upside of S&P 500 so additional downside on the oil price front could hurt the momentum of the U.S. stock market.

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

Oil Finally a Needed Pullback towards 27-30 Zone

Dear Traders,

Oil is making a needed pullback towards lower levels. At this point we can see a drop signalled by CAMMACD.Core

The price on Oil was accumulating at resistance close to 35.00. We can see a clear “slingshot” signal from CAMMACD.Core where the price made a start of the move lower at 33.20. The 4h close below W L3 implies further continuation down towards 27-30 zone. I wouldn’t even exclude a visit to M H3 25.21, but only if the price makes a 4h close below 27.63- W L5 camarilla pivot.

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.

 

Oil Price Fundamental Daily Forecast – Weaker after API Reports Large Unexpected Inventories Build; EIA on Tap

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday, shortly before the NYMEX regular session opening at 12:00 GMT and ahead of the U.S. Energy Information Administration (EIA) weekly inventories report at 15:00 GMT.

Prices are down for a second session on Thursday as a U.S. private industry report showed a steep and surprising build-up in crude stockpiles, putting a lid on hopes of a smooth demand recovery as the global economy begins to ease its way out of coronavirus-related lockdowns.

At 06:46 GMT, July WTI crude oil is trading $31.95, down $0.86 or -2.62% and August Brent crude oil is at $34.91, down $0.54 or -1.52%.

Russia’s Commitment is Questioned

On the demand front, traders are becoming a little worried about Russia’s commitment to deeper than agreed upon oil production cuts ahead of a June 9 meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.

“As is often the case during a run-up to an OPEC+ meeting, the focus is squarely on Russia’s commitment and understandably so as historically they have been the laggard within the OPEC+, said Stephen Innes, chief global markets strategist at AxiCorp.

Two days ago Russian Energy Minister Alexander Novak met with domestic major oil companies to discuss the implementation of global oil production curbs and the possible extension of the current level of cuts beyond June, sources familiar with the plans told Reuters.

American Petroleum Institute Weekly Inventories Report

The API reported late Wednesday a large crude oil inventory build, of 8.731 million barrels for the week-ending May 22. Analysts were looking for an inventory draw of 2.50 million barrels.

The API also reported a build of 1.120 million barrels of gasoline for the week-ending May 22, compared to last week’s 651,000-barrel draw. This week’s draw compares to analyst expectations for a 33,000-barrel draw for the week.

Distillate inventories were up by 6.907 million barrels for the week, compared to last week’s 5.1 million-barrel build, while Cushing inventories saw a draw of 3.370 million barrels.

Daily Forecast

After nearly a one-month rally, crude oil traders are booking profits. Prices just got too high given the uncertain outlook for supply and demand beyond June. Although we don’t expect the markets to come anywhere close to their late April lows, we would not be surprised by a normal 50% to 61.8% correction of the rally.

Worries about whether Russia will go along with an OPEC+ extension of the output cuts is understandable since there is always apprehension ahead of and OPEC+ meeting.

The wildcard over the near-term will be U.S. inventories. Given the steep drop in the number of operating wells, traders are expecting today’s EIA report to show a 2.5 million-barrel decline. Prices could stabilize if the report hits or exceeds the mark. However, expect a steep break if the numbers are bearish.

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

U.S Weekly Jobless Claims to Put the Greenback in Focus as Geopolitical Risk Lingers

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Aussie Dollar and Kiwi Dollar were in action once more.

Away from the economic calendar, the markets also responded to the moves across the EU and the U.S from Wednesday.

Fiscal stimulus from Brussels and the U.S government’s moves to further reopen the economy provided both support for riskier assets early on. Market sentiment overshadowed economic data that remained weak while improving …

For the commodity currencies, however, concerns over rising tensions between the U.S and China did pin back any breakouts.

Looking at the latest coronavirus numbers,

On Wednesday, the number of new coronavirus cases rose by 110,221 to 5,788,503. On Tuesday, the number of new cases had risen by 95,878. The daily increase was higher than both Tuesday’s rise and 89,941 new cases from the previous Wednesday.

France, Germany, Italy, and Spain reported 1,892 new cases on Wednesday, which was up from 1,535 new cases on Tuesday. On the previous Wednesday, 3,225 new cases had been reported.

From the U.S, the total number of cases rose by 20,392 to 1,745,803 on Wednesday. On Tuesday, the total number of cases had risen by 19,185. On Wednesday 20th May, a total of 21,774 new cases had been reported.

For the Kiwi Dollar

Business Confidence improved in May, with the ANZ Business Confidence Index rising from an April -66 to a finalized -41.8. May’s prelim had come in at -46.

According to the latest ANZ Report,

  • A net 39% of firms expect weaker economic activity in their own business, with the retail sector the most pessimistic once more.
  • Employment intentions rose from a net 50.8% of firms intending to reduce employment to a net 42%.
  • Investment intentions improved marginally from a negative 45% to a negative 32%.
  • Profit expectations rose from a net 70.4% expecting lower profitability to a net 56%. The agricultural sector remained the weakest at -71%, with the construction sector the least negative at -42%.
  • Export intentions rose by just 6 points to -36.

The Kiwi Dollar moved from $0.61897 to $0.61840 upon release of the numbers. At the time of writing, the Kiwi Dollar was up by 0.05% to $0.6185.

For the Aussie Dollar

1st quarter private new capital expenditure fell by 1.6%, quarter-on-quarter, following a 2.8% fall in the 4th quarter. Economists had forecast a 2.6% decline.

According to the ABS,

  • While investments in building and structures fell by 1.1%, investments in equipment, plant, and machinery slid by 2.3%.
  • Year-on-year, total New CAPEX slid by 6.1%.
  • Investments in building and structures tumbled by 7.9%, with investments in equipment, plant, and machinery falling by 4.0%.

The Aussie Dollar moved from $0.66222 to $0.66282 upon release of the figures. At the time of writing, the Aussie Dollar flat at $0.6622.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.13% to ¥107.86 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s another relatively quiet day ahead on the economic calendar. Key stats include prelim May inflation figures from Germany and Spain.

Business and Consumer confidence figures out of Italy and the Eurozone should have a muted impact, following the EU’s COVID-19 recovery plan announced on Wednesday.

We will expect EU’s recovery plan and the continued easing of lockdown measures to provide support.

The markets will need to track any chatter from Beijing and Washington, however. Any rise in tensions and action from either side will test risk appetite on the day.

At the time of writing, the EUR was up by 0.11% to $1.1018.

For the Pound

It’s yet another quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

On Wednesday, we saw the Pound take a hit in response to the threat of the BoE cutting interest rates into negative territory.

BoE Chief Economist Haldane had attempted to pour cold water on such a prospect but to no avail.

Through the day, expect market risk sentiment and any Brexit chatter to be key drivers.

At the time of writing, the Pound was up by 0.05% to $1.2267.

Across the Pond

It’s a busy day ahead on the U.S economic calendar. Economic data includes April durable goods, 2nd estimate GDP numbers, and pending home sales figures for April.

Barring any deviations from 1st estimates, expect April’s core durable goods orders to garner some attention.

Any moves in response to the durable goods orders are likely to be limited, however. The market focus will be on the weekly jobless claims figures.

There’s plenty of optimism as the U.S economy continues to reopen, but whether the markets can stomach another 2m jump remains to be seen.

The Dollar Spot Index was down by 0.17% to 98.893 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats due out of Canada to influence the Loonie.

A lack of stats will leave the Loonie in the hands of market risk sentiment and the weekly EIA crude oil inventory numbers…

At the time of writing, the Loonie was down by 0.02% to C$1.3755 against the U.S Dollar.

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

Oil Price Fundamental Daily Forecast – API Report Expected to Show 2.5M Barrel Draw

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower late Wednesday, shortly before the release of the American Petroleum Institute (API) weekly inventories report at 20:30 GMT.

Oil prices tumbled early in the session after U.S. President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong and as some traders doubted Russia’s commitment to deep production cuts.

Later in the session, U.S. Secretary of State Mike Pompeo said he had certified that Hong Kong no longer warrants special treatment under U.S. law as it did when it was under British rule, a blow to its status as a major financial hub.

But those aren’t the concerns late in the session on Wednesday, traders want to see if the API numbers will show a third consecutive weekly draw.

At 20:02 GMT, July WTI crude oil futures are trading $32.90, down $1.45 or -4.22% and August Brent crude oil is at $35.54, down $1.20 or -3.27%.

Oil Prices Jumped after Last Week’s API Report

On May 19, the American Petroleum Institute (API) reported a large crude oil inventory draw of 4.8 million barrels for the week-ending May 15.

WTI was trading up in the afternoon on May 19 prior to the API’s data release, but the day had already seen a two-sided trade, then back to a gain as the demand picture turned a bit rosier than it has been over the past few weeks.

Oil production in the United States has now fallen from 13.1 million bpd to March 13 to 11.6 bpd for May 8, according to the Energy Information Administration – a drop of 1.5 million barrels.

The API also reported a draw of 651,000 barrels of gasoline for the week-ending May 15 and distillate inventories were up by 5.1 million barrels for the week, while Cushing inventories saw a draw of 5 million barrels.

Daily Forecast

Today’s API report is expected to show another drawdown of about 2.5 million barrels. A steady to better reading could launch crude oil higher into the late session close.

A bad report will sent prices lower. The upside momentum seems to be slowing so I anticipate any sell-off to lead to a substantial near-term correction.

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

Oil Pulls Back As U.S. – China Relations Return Into Spotlight

Oil Video 27.05.20.

China’s Oil Demand Is Set To Grow By 16.3% In The Second Quarter

Oil pulls back from recent highs as U.S. – China tensions impact the mood of oil traders.

As I mentioned earlier, the deterioration of  U.S. – China relations was an important factor for oil as the continuation of a trade war between the two biggest economies was a bearish catalyst for oil demand.

According to Wood Mackenzie analysis, China’s oil demand will recover to 13 million barrels per day (bpd) in the second quarter of 2020, up 16.3% from the first quarter.

However, the country’s demand will still be lower by 2.5% compared to the second quarter of 2019. Wood Mackenzie also noted that jet fuel demand will remain weak due to restrictions on international flights.

The potential U.S. sanctions on China related to new legislation in Hong Kong create another layer of uncertainty. If such sanctions are implemented, China’s economic activity may suffer a blow, putting pressure on oil demand.

Russia Discusses Possibility Of Implementing Current Production Cuts For Two More Months

According to Interfax, Russian Energy Minister Alexander Novak and Russian oil companies have discussed the potential to implement current production cuts until the end of summer.

Strict compliance with quotas on the Russian side was a positive surprise for the market after the OPEC+ deal. Now that such cuts were implemented, it will be easier to maintain them for two more months.

The original deal implies that OPEC+ production should decrease by 9.7 million bpd in May – June, and then decrease by 7.7 million bpd until the end of the year. OPEC+ is scheduled to meet on June 10 to evaluate further actions.

The key intrigue is whether the group will decide to maintain existing production cuts in order to work through the excess oil inventories and provide additional support to oil prices.

Russia is one of the two biggest contributors to the production cut deal. Unlike Saudi Arabia, Russia faces significant technological challenges when adjusting production in a quick fashion – some wells may be permanently damaged.

In this light, Russia’s discussions about the continuation of the current production cuts are a positive signal for the oil market.

It remains to be seen whether OPEC+ will ultimately agree to change the original production cut schedule, but it looks like member countries are very concerned about the potential oil price collapse in case they do not provide sufficient support to the market as it tries to recover from the coronavirus crisis.

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

 

Crude Oil Price Forecast – Crude Oil Markets Continue to Press Gap Above

WTI Crude Oil

The West Texas Intermediate Crude Oil market has been quiet and choppy during trading on Wednesday, as we await to see whether or not the inventory situation is changing. What is working against the crude oil market more than anything else is the fact that Russia’s already starting to talk about increasing production in June, while the Gulf States are talking about the other side of the equation. At this point, the market looks to be a little bit confused, but the gap above still needs filled and it certainly looks as if the buyers are going to try to make that happen. I believe the $30 level underneath should be somewhat supportive.

Crude Oil Video 28.05.20

Brent

Brent markets also look as if they are supported just below, in the form of the 50 day EMA. There is still a gap above here that needs filled as well, and as a result I think it is only a matter of time before the markets tried to push into that gap. The $40 level of course is a significant round number, so course there will be traders look at that as well. Ultimately, if we break above that level then it is time to fill the gap which extends all the way to the $45 level. On the other hand, the market breaks down below the 50 day EMA, then it is likely that we will break down towards the $30 level. At this point though, it looks like the buyers are very tenacious so one would have to think that it favors a bit of a grind to the upside still.

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

Crude Oil Price Update – Momentum Could Shift Lower Under $32.77

U.S. West Texas Intermediate crude oil futures are trading softer on Wednesday shortly after the regular session opening. The catalyst behind the weakness is the fear that retaliation by the United States against China for its decision to implement national security laws on Hong Kong will lead to lower demand.

At 14:09 GMT, July WTI crude oil is trading $33.21, down $1.14 or -3.32%.

On Tuesday, U.S. President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong. An escalation of tensions between the two biggest economies could ratchet up the pressure on global businesses and oil demand already weakened by the coronavirus pandemic.

In other news, European Central Bank President Christine Lagarde released a gloomy forecast for the Euro Zone economy that also weighed on crude oil sentiment. Lagarde said the Euro Zone economy is likely to shrink between 8% and 12% this year.

Later today at 20:30 GMT, traders will get the opportunity to react to the latest inventories data from the American Petroleum Institute (API). Traders are looking for a drawdown of 2.5 million barrels.

Daily July WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but momentum is trending higher. The main trend will change to up on a trade through $35.18. A move through $17.27 will signal a resumption of the downtrend. This is highly unlikely, but there is room to the downside for a normal 50% to 61.8% retracement.

The minor trend is up. This is controlling the upside momentum. A trade through $30.72 will change the minor trend to down.

The main range is $54.86 to $17.27. Its retracement zone at $36.07 to $17.27 is the primary upside target zone.

The minor range is $30.72 to $34.81. Its 50% level or pivot at $32.77 is potential support today.

The short-term range is $17.27 to $34.81. If the minor trend changes to down then look for a possible pullback into its retracement zone at $26.04 to $23.97.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $33.21, the direction of the July WTI crude oil market the rest of the session on Wednesday is likely to be determined by trader reaction to the pivot at $32.77.

Bullish Scenario

Holding above $32.77 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for a retest of $34.81.

Taking out $35.18 will change the main trend to up, but we may not see a breakout out to the upside because of the major retracement zone at $36.07.

Bearish Scenario

A sustained move under $32.77 will signal the presence of sellers. This could trigger an acceleration to the downside with $30.72 the next likely target. This price level is a potential trigger point for an acceleration to the downside since the next major target doesn’t come in until $26.04 to $23.97.

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