Silver Price Daily Forecast – Silver Tries To Settle Above The 50 EMA

Silver Video 20.10.20.

Silver Gains Ground On Weaker U.S. Dollar

Silver continues its attempts to settle above the nearest resistance level at the 50 EMA at $24.50 as the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has managed to settle below the 20 EMA at 93.50 and is declining towards the 93 level. If the U.S. Dollar Index settles below the support at 93.00, it will gain additional downside momentum which will be bullish for silver.

Meanwhile, gold is stuck at the 50 EMA level at $1905. Gold failed to develop any momentum in recent trading sessions but managed to stay above the $1900 level. If gold moves above the 50 EMA, it will have a chance to develop upside momentum and get to the test of the next resistance at $1930 which will be bullish for silver and other precious metals.

Gold/silver ratio continues its downside move and is currently declining towards the 77 level. If gold/silver ratio gets below 77, it will move towards the recent lows near 75.50 which will be a favorable scenario for silver.

Technical Analysis

silver october 20 2020

Silver is trying to move above the nearest resistance level at the 50 EMA. Silver has already tested this resistance level several times but failed to gain sufficient upside momentum.

If silver manages to settle above the 50 EMA, it will move towards the highs reached during the previous trading session near $25.00. A move above $25.00 will open the way to the test of October highs at $25.55.

On the support side, the nearest support level for silver is located at $23.90. There are no material levels between $23.90 and the 50 EMA at $24.50 so silver may quickly get to the test of the nearest support level in case the right catalysts emerge.

A move below the support at $23.90 will push silver closer to the next support level at $23.30.

From a big picture point of view, silver needs to settle above the 50 EMA in order to continue its upside move. If silver fails to move above this resistance level, the risks of a sell-off will increase.

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

IMF Expects Precious Metals Index to Rise

IMF’s economic outlook for 2020 is less grim, but the more distant future is more worrisome. Therefore, the precious metals index is expected to rise.

October’s edition of the IMF’s World Economic Outlook Report is out! The main message that the report conveys is that the IMF now predicts a less severe global contraction than in 2020 but a slower recovery in 2021 . The global economy is projected to plunge 4.4 percent this year and rise 5.2 percent in the subsequent year, contrary to the -5.2 and 5.4 percent changes forecasted in June.

Unfortunately, the prospects for emerging countries, excluding China, have worsened, and the economic decline for 2020 is projected to be greater than previously estimated. As a result, the pandemic will reverse the progress made since the 1990s in reducing global poverty.

When it comes to the US economy, it is forecasted to contract by 4.3 percent this year before growing at 3.1 percent in 2021, compared to -8 percent and 4.5 percent seen a few months ago. However, the reasons for the celebration are limited, as these projections could be revised down soon.

You see, the problem is that the second wave of the coronavirus cases (see the chart below) is hurting the employment rate again.

As the chart below points out, the number of Americans who applied for unemployment benefits has recently risen to the highest level over the last few weeks.

Even though the IMF’s near-term projection improved, another issue is that the baseline forecast envisages growth to slow down into the medium term , as the deep downturn this year will harm the supply potential. It means that the US will only modestly progress toward the 2020–25 path of economic activity projected before the epidemic .

Most importantly, the subdued outlook for medium-term growth comes with a significant projected increase in public debt stock. What is worrying is that the reduced potential output also implies a smaller mid-term tax base than previously anticipated, making repaying debts even more difficult.

Indeed, debt is an increasingly pressing problem all over the world , including the US. As a matter of fact, according to the IMF’s Fiscal Monitor , the debt-to-GDP ratio will stabilize next year everywhere but China and the US:

In 2020, government deficits are set to surge by an average of 9 percent of GDP, and global public debt is projected to approach 100 percent of GDP, a record high. Under the baseline assumptions of a healthy rebound in economic activity and low, stable interest rates, the global public debt ratio is expected to stabilize in 2021, on average, except in China and the United States.

However, public debt is not the only big problem in the US. Corporate indebtedness is also a worrying issue . In response to the coronavirus crisis, firms have also taken on more debt to cope with the reduced income and cash shortages, adding to the already high debt levels. Therefore, if the recovery is delayed, “liquidity pressures may morph into insolvencies,” according to the IMF’s Global Financial Stability Report . So far, the policy support limited the scale of bankruptcies. Still, the economists from the Bank of International Settlements predict that bankruptcies in advanced economies could rise from the baseline in 2019 by around 20 percent in 2021.

Implications for Gold

What does all the above mean for the gold market? Well, the improved near-term outlook for the US economy is not good news for the yellow metal. However, the slower expected growth in 2021 and beyond is becoming more positive. Notably, “the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks”. In other words, the uncertainties persist, which should support the safe-haven demand for gold as a result .

It is perhaps why the IMF expects that the precious metals index will increase by 28.4 percent in 2020 and by an additional 10.4 percent in 2021 amid the elevated risks and dovish monetary policy .

The growing coronavirus cases, subsequent worries about the already fragile recovery, US presidential election uncertainty have recently pushed gold prices above $1,900, as one can see in the chart below.

What is most important here is that the price of gold managed to rise above $1,900 again, despite the declining odds of a new fiscal stimulus before the elections and the resulting S&P 500 Index decrease. Gold’s decoupling from the stock market would increase its role as a safe-haven asset.

However, it might be the case that gold is just hovering around $1,900 right now, and it needs a fresh catalyst to continue its rally . Who knows, maybe the US presidential elections, which are likely to be contested, will provide such a trigger? We will elaborate on this later – stay tuned!

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

 

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Hits Three-Week Low on QE Expectations

The Australian and New Zealand Dollars are trading sharply lower on Tuesday, putting them in a position to change their respective trends to down on the daily chart for the first time in nearly two-weeks.

Both currencies are being pressured by increasing expectations of monetary easing with the Australian central bank likely to take action at next month’s meeting and the New Zealand central bank likely to make their move early next year.

At 08:15 GMT, the AUD/USD is trading .7047, down 0.0022 or -0.32% and the NZD/USD is at .6575, down 0.0033 or -0.50%.

US Dollar Supported as Stimulus Deal Hopes Fade

Also weighing on the Aussie and the Kiwi was as stronger U.S. Dollar, which rose as fading hopes for a U.S. coronavirus aid package dealt a blow to risky assets worldwide.

While traders remain hopeful talks between U.S. House Speaker Pelosi and Treasury Secretary Mnuchin will result in a deal before the November 3 presidential election, any agreement will have to pass the Republican-controlled Senate where opposition to a bigger stimulus bill remains stubborn.

RBA Minutes Weigh on Aussie as QE Looms Large

The Reserve Bank of Australia (RBA) discussed the possibility of further monetary easing at its October board meeting, including cutting the cash rate towards zero and buying longer-dated government bonds, minutes of its most recent meeting showed on Tuesday.

RBA board members noted larger balance sheet expansions by other central banks had led to lower sovereign yields in most other rich nations, minutes of the October 6 meeting showed.

Board members also discussed implications for the exchange rate, providing the clearest sign yet the RBA will likely soon cut rates further and expand its massive bond buying campaign, to lower both borrowing costs and the local dollar.

Short-Term Forecast

The RBA has held its cash rate at a record low 0.25% since can emergency 50 basis points (bps) cut in mid-March. However, economists widely predict the RBA will trim the rate at its November 3 policy meeting by 15 bps to 0.1%. This move, coupled with the buying of bonds further out the yield curve should be enough to keep the pressure on the Aussie Dollar.

Buying long-dated bonds is one way that central bank policymakers would reduce funding costs.

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

AUD/USD Daily Forecast – Australian Dollar Remains Under Pressure

AUD/USD Video 20.10.20.

U.S. Dollar Continues To Gain Ground Against Australian Dollar

AUD/USD remains under pressure as the U.S. dollar is gaining some ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to get back above the 20 EMA at 93.55. If this attempt is successful, the U.S. Dollar Index will gain additional upside momentum and head towards the next resistance level at the 50 EMA at 93.75. This scenario will be bearish for AUD/USD.

Today, AUD/USD traders will focus on the economic data from U.S. Building Permits are projected to increase by 1.8% month-over-month in September while Housing Starts are expected to grow by 2.8%.

In addition to economic news, the market will pay attention to the U.S. coronavirus aid package negotiations. At this point, it looks like Republicans and Democrats will not be able to reach any deal before the November election. However, a last-minute deal is also possible.

Technical Analysis

aud usd october 20 2020

AUD/USD has managed to settle below 0.7075 and gained additional downside momentum. However, it received support at 0.7030 and is currently trading in the range between the support at 0.7030 and the resistance at 0.7075.

If AUD/USD manages to settle below the support level at 0.7030, it will continue its downside move and head towards September lows at 0.7005. A move below the support at 0.7005 will open the way to the test of the next support level at 0.6975.

On the upside, the nearest resistance level for AUD/USD is located at the previous support level at 0.7075. AUD/USD needs to settle above this level to have a chance to develop upside momentum.

If AUD/USD moves above the resistance at 0.7075, it will gain additional upside momentum and head towards the next resistance at 0.7100.

A successful test of the resistance at 0.7100 will open the way to the next resistance at 0.7130. The 20 EMA is located in the nearby, so this resistance level is set to be a significant obstacle on the way up for AUD/USD.

If AUD/USD manages to settle above the resistance at 0.7130, it will move towards the next resistance level at 0.7150.

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

Price of Gold Fundamental Daily Forecast – Rangebound as Fiscal Stimulus Deadline Looms

Gold futures are edging lower on Tuesday taking out yesterday’s low in the process as the rangebound market continues to be held hostage by Washington policymakers’ inability to come to an agreement as to the size and timing of the next U.S. fiscal stimulus package.

So far this week, the market is hovering just above the psychological $1900 level as caution spreads ahead of a deadline for agreement on a new U.S. coronavirus stimulus package and next month’s presidential election.

At 07:06 GMT, December Comex gold is trading $1905.60, down $6.10 or -0.32%.

The lingering choppy, two-sided trade in gold is really a reflection of the problem in the U.S. where politicians are putting their party platforms ahead of the needs of the people.

Gold is being supported by the hope of a stimulus deal ahead of the presidential elections on November 3, but some traders are starting to dispel that thought, while stating that a fresh round of U.S. fiscal stimulus is likelier to be a post-election event.

Then there’s the truth issue. Are we actually being told the truth about the negotiations – a couple of million here, a couple of million there? What’s the difference?

President Trump doesn’t seem to care about the stimulus. Two weeks ago, he called for an end of the negotiations and for Republican Senators to focus on the affirmation of his Supreme Court nominee. He then came back later with suggestions to piecemeal the package.

Trump is focused on his reelection campaign, seemingly conceding that the money won’t be in the hands of voters before the election. Furthermore, if he loses the election then what difference does it make to him if people get additional stimulus measures.

Besides, post-election stimulus is not guaranteed either because the Democrats are likely to save their bullets for an even bigger stimulus package in 2021.

Short-Term Outlook

Let’s start by saying I believe the longer-term up trend is fully supported, but the short-term outlook is very shaky due to the lack of clarity from Washington.

We may see some heightened volatility on Tuesday because after all, it is the deadline set by House Speaker Pelosi.

Pelosi and Treasury Secretary Steve Mnuchin “continued to narrow their differences” about the package, her spokesman Drew Hammill said.

Pelosi hopes that by the end of Tuesday there will be “clarity” on whether a stimulus bill can be passed before the November 3 election, he wrote on Twitter.

I think there are too many variables out there to produce a major rally in gold if a stimulus deal is made. How big will it be? When will the money be distributed? But we’re likely to see a knee-jerk rally if the U.S. Dollar falls on the news.

I believe that gold’s downside will be limited if there is no deal and negotiations are called off. This is because investors will be counting on a new fiscal deal after the election.

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

EUR/USD Daily Forecast – Euro Tries To Continue Its Upside Move

EUR/USD Video 20.10.20.

U.S. Dollar Remains Under Pressure Against Euro

EUR/USD has managed to settle above the resistance at 1.1750 and is trying to get above the next resistance at 1.1780 while the U.S. dollar is flat against a broad basket of currencies.

The U.S. Dollar Index has managed to settle below the 20 EMA at 93.55 on hopes for a new U.S. stimulus package. While the stock market has abandoned such hopes and finished yesterday’s trading session deep in the red zone, currency traders are more optimistic so the U.S. dollar is not able to develop upside momentum.

The nearest support level for the U.S. Dollar Index has emerged near 93.25. In case the U.S. Dollar Index manages to settle below this level, EUR/USD will have good chances to gain additional upside momentum and settle above 1.1800.

Just like the British pound, EUR/USD will remain sensitive to Brexit news. At this point, EU and Britain blame each other for the lack of progress in negotiations. The market believes that both sides are bluffing and that they will ultimately reach a compromise deal.

If this does not happen, EUR/USD may find itself under material pressure as a no-deal Brexit will present an additional problem for the European economy which is currently suffering from the second wave of the virus.

Technical Analysis

eur usd october 20 2020

EUR/USD continues its attempts to settle above the nearest resistance level at 1.1780. In case EUR/USD manages to get above this level, it will gain additional upside momentum and head towards the next resistance at October highs at 1.1830.

A move above 1.1830 will signal that EUR/USD is ready to move higher. In this case, EUR/USD will have to deal with the resistance at 1.1870 on the way to the major resistance level at 1.1910.

On the support side, the previous resistance at 1.1750 will likely serve as the first support level for EUR/USD. If EUR/USD settles below this level, it will decline towards the next support at 1.1720. A move below the support at 1.1720 will open the way to the test of the next support level at 1.1695.

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

Oil Bears take Control

This prevailing macro had quenched oil bulls resolve in breaking above $45/Barrel in the mid-term as the number of caseloads surged past 40 million.

Both major crude oil benchmarks, however remained above $40/Barrel but selling pressure of late, have intensified around their critical support levels, meaning the bears now hold the ace in testing below such levels as global energy demand falter in the near term.

Although oil traders are not having sleepless nights on the bias that crude oil prices are relatively stable after that the sharp plunge seen at the start of September. Brent crude has been able to recover to the $42/barrel price level but low volatility and choppy price range sighted in its most recent price action is sending warning signals to oil traders that oil bulls are momentarily exhausted.

In spite of such dampening fundamental, oil traders are highly skeptical that a repeat of a March and April decline will come to play amid renewed lockdown modes sighted in emerged markets like France, Germany and United Kingdom.

The global demand picture for crude oil still remains fragile on the basis that the restriction of human mobility will continually weigh on crude oil demand/supply rebalancing, amid major oil players that include the Saudis and Russians not giving a clear picture if they would reconsider the planned early next year output boost.

That said, oil traders will also focus on the outcome for the long-awaited US stimulus deal in the near term as such positivity from that deal could awaken oil bulls and push Brent crude prices above $43/barrel.

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

IBM Slides After Revenues Miss Wall Street Forecasts

International Business Machines Corporation (IBM) shares fell 2.77% in after-hours trade Monday after the computing giant posted its third consecutive quarter of declining revenue as the coronavirus pandemic continued to weigh heavily on its end customers in industries such as retail and transportation.

The company reported third-quarter (Q3) net income of $2.3 billion, or $2.58 a share, roughly in-line with analyst forecasts. However, the figure was down from earnings per share (EPS) of $2.68 in the same quarter last year. Revenues during the period slumped 2.5% to $17.56 billion and came in below the consensus mark of $17.54 billion. The company has now seen revenue decline in all but four of the last 33 quarters on an annualized basis.

Through yesterday’s close, IBM stock has a market capitalization of $111.8 billion, offers an enticing 5.18% dividend yield, and trades relatively flat on the year and over the past three months as of Oct. 20, 2020.

Company Spinoff

Earlier this month, IBM announced that it plans to spin off its IT outsourcing business to focus more closely on cloud computing and artificial intelligence (AI). The company said revenue for its cloud computing offerings grew 19% in the third quarter. “We are making strategic decisions, taking actions, and increasing investments today to better position our business and accelerate our top-line growth on a sustainable basis,” CEO Arvind Krishna told investors during the earnings call, per CNBC.

Wall Street View

Morgan Staley’s Katy L. Huberty raised her price target on IBM to $140 from $128 while maintaining her ‘Equal-weight’ on the stock after the firm revealed details of the spinoff. The analyst argues the company is moving in the right direction by reducing its reliance on its legacy businesses and investing more in technology growth areas like the cloud and AI. More broadly, the stock receives 4 ‘Buy’ ratings, 9 ‘Hold’ ratings, and 2 ‘Sell’ ratings. IBM currently trades 11.5% below Wall Street’s median 12-month price target of $140.

Technical Outlook and Trading Tactics

IBM shares have oscillated roughly within a 20-point range since early May, offering several opportunities for traders who favor rangebound strategies. More recently, price broke above both an eight-month downtrend line and the 200-day simple moving average (SMA) after the company announced the spinoff. Since then, profit-takers moved in, leading to a retracement back to the initial breakout point, which now becomes a crucial support area.

Active traders who take a long position here should look for a move back up to major resistance at $151.50 while managing risk with a stop-loss order placed somewhere below the blue downtrend line.

Oil Price Fundamental Daily Forecast – Gains Capped by Intensifying COVID-19 Second Wave Worries

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower on Tuesday, while rangebound for a third session into a technical retracement area. The price action indicates investor indecision and impending volatility despite worries about further demand loss due to rising coronavirus cases and the potential for increasing supply.

At 06:00 GMT, December WTI crude oil futures are trading $40.93, down $0.13 or -0.32% and December Brent crude oil is at $42.46, down $0.16 or -0.38%.

Rising COVID-19 Cases Expected to Weigh on Demand

The story that continues to dominate the trade and keep a lid on prices is worries a resurgence of coronavirus cases globally is stifling a promising recovery in fuel demand, while growing output from Libya adds to plentiful supply.

The threat of another wave of coronavirus cases is certainly painting a bleak picture for demand. There doesn’t appear to be an end in sight since measures such as social distancing and mask-wearing are being practiced in some areas and not in others. The outlook for a successful vaccine is also gloomy. It may be just a matter of time before another wave of demand destruction hits.

COVID-19 cases topped 40 million on Monday, according to a Reuters tally, with a growing second wave in Europe and North America sparking new clampdowns.

Rising Output from Libya Another Major Concern

Rising output from Libya, which is operating outside the OPEC+ pact, was adding to oversupply concerns.

Libya is rapidly ramping up production after armed conflict shut almost all of the country’s output in January. Output form its biggest field, Sharara, which reopened on October 11, is now at around 150,000 bpd, or about half its capacity, two industry sources told Reuters.

OPEC+ Holds Key to Controlling New Supply Worries

A meeting on Monday of a ministerial panel of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together called OPEC+, pledged to support the oil market as concerns grow over soaring infections.

For now OPEC+ is sticking with a deal to curb output by 7.7 million barrels per day (bpd) through December, and then shaving the cuts back to 5.8 million bpd in January.

Short-Term Outlook

The real question that needs to be answered is, will the oil market be able to absorb the around 2% of global supply that OPEC+ is expected to restart from January 1, 2021?

Oil demand is at about 92% of pre-pandemic levels, “but it’s too early to declare an end to the COVID-19 oil demand destruction era,” said Rystad Energy oil market analyst Louise Dickson.

We think the way of least resistance is down because we’re looking for demand to weaken and global supply to rise over the near-term. OPEC+ would have to change its mind and announce a reversal of its planned output increase from January, and a working vaccine would have to be implemented before we’d see a breakout to the upside of this current rangebound trade.

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

GBP/USD Daily Forecast – British Pound Remains Sensitive To Brexit News

GBP/USD Video 20.10.20.

British Pound Is Flat Against U.S. Dollar After Yesterday’s Volatile Trading Session

GBP/USD failed to settle above the resistance at 1.3000 and returned to the 50 EMA level at 1.2945 as traders reacted to news on Brexit negotiations.

GBP/USD got a boost after British minister Michael Gove stated that European Union’s Michel Barnier agreed to intensify negotiations. Later, Britain’s negotiator David Frost signaled that the country would not continue talks until EU offers consessions. This statement put material pressure on GBP/USD and pushed it back below 1.3000.

Most likely, GBP/USD will remain highly sensitive to Brexit news in the upcoming trading sessions.

In addition to Brexit talks, GBP/USD traders will focus on UK inflation data which will be published on Wednesday. Inflation Rate is expected to increase by 0.5% year-over-year in September while Core Inflation Rate is projected to grow by 1.3%.

Currently, Britain is fighting against the second wave of coronavirus, and it is interesting to see whether problems on the virus front put pressure on prices. Previously, Bank of England stated that it did not rule out an adoption of negative interest rate policy.

Just like other major central banks, Bank of England is trying to bring inflation to the 2% mark. If the inflation reports are weaker than expected, the odds of negative rates will increase.

Technical Analysis

gbp usd october 20 2020

GBP/USD continues its attempts to settle above the 50 EMA at 1.2945. In case GBP/USD manages to stay above the 50 EMA, it will have a chance to develop additional upside momentum and get to the test of the highs of the previous trading session near 1.3030.

I’d note that GBP/USD has mostly ignored the resistance at 1.3000 in recent sessions but there’s a chance that it may still face some resistance at this level on the way up.

In case GBP/USD moves above the resistance at 1.3030, it will head towards October highs near 1.3070.

On the support side, the nearest support level for GBP/USD is located at 1.2890. If GBP/USD gets below this level, it will gain downside momentum and decline towards the next support at 1.2815.

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

ConocoPhillips Agrees to Acquire Concho Resources for $9.7 Billion

ConocoPhillips, an independent oil and gas exploration company, said it will acquire the U.S. shale oil producer Concho Resources in an all-stock transaction valued at $9.7 billion.

Under the terms of the deal, each share of Concho Resources common stock will be exchanged for a fixed ratio of 1.46 shares of ConocoPhillips common stock, representing a 15% premium to closing share prices on October 13, the company said.

“The 15% premium for the acquiree compares favourably with recent transactions, such as Devon’s merger with WPX, but is modest by historical standards. Until recently, we would have considered a premium of 20%-30% to be the norm for an exploration and production company takeover,” said Dave Meats, director at Morningstar.

“But the environment for E&Ps has deteriorated recently, following the pandemic-related collapse in crude prices. And for Concho specifically, the upcoming presidential election could be more of a threat than it is for most shale companies because Concho has much more exposure to federal land than its peers do,” Meats added.

The transaction is expected to close in the first quarter of 2021.

ConocoPhillips shares ended 3.16% lower at $32.7 on Monday; the stock is down about 50% so far this year. Concho Resources shares closed 2.75% lower at $47.26 on Monday; the stock is down about 46% so far this year

ConocoPhillips stock forecast

Twelve analysts forecast the average price in 12 months at $47.91 with a high forecast of $56.00 and a low forecast of $37.00. The average price target represents a 46.51% increase from the last price of $32.70. From those 12 equity analysts, 11 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $47 with a high of $69 under a bull scenario and $23 under the worst-case scenario. Citigroup raised their stock price forecast to $39 from $37 and Truist Securities upped their price objective to $55 from $52.

Several other analysts have also recently commented on the stock. ConocoPhillips had its target price decreased by stock analysts at Bank of America to $46 from $50. The brokerage currently has a “neutral” rating on the energy producer’s stock. KeyCorp started coverage on ConocoPhillips, issuing an “overweight” rating and a $46.00 price objective for the company. At last, Raymond James raised their target price to $48 from $46 and gave the company an “outperform” rating.

Concho Resources stock forecast

Twelve analysts forecast the average price in 12 months at $67.73 with a high forecast of $79.00 and a low forecast of $55.00. The average price target represents a 43.31% increase from the last price of $47.26. From those 12 equity analysts, 11 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $64 with a high of $81 under a bull scenario and $22 under the worst-case scenario. Citigroup lowered their stock price forecast to $67 from $72 and JP Morgan establishes December 2021 price target of $68 vs December 2020 price target of $65.

Several other analysts have also recently commented on the stock. Concho Resources had its target price dropped by Bank of America to $65 from $70. The firm presently has a “buy” rating on the oil and natural gas company’s stock. Mizuho downgraded Concho Resources from a “buy” rating to a “neutral” rating and boosted their price target for the company from $68 to $69.

Analyst Comments

“ConocoPhillips’ (COP) announced the acquisition of Concho Resources (CXO) fortifies the company’s leadership position within US energy. Pro-forma, a diverse portfolio of low-cost resource + ESG focus differentiates COP in lower growth, returns focused shale ‘era.’,” said Devin McDermott, equity and commodities Strategist at Morgan Stanley.

“ConocoPhillips checks all the boxes for sustained outperformance: excellent management, disciplined investment, and consistent return of cash coupled with high quality, low-cost portfolio that can deliver an attractive combination of FCF and growth.”

“Attractive value proposition even in the current commodity price environment with leverage to any rally in oil and with resiliency should price remain low. Strong balance sheet. While management received some investor pushback in 2019 for building an $8 billion strategic cash balance, that disciplined strategy is paying off in 2020 – creating financial and strategic flexibility,” McDermott added.

Upside and Downside Risks to ConocoPhillips

Upside: 1) Higher commodity prices. 2) Upside to Alaska resource discovery. 3) Better well performance in Lower 48 – highlighted by Morgan Stanley.

Downside: 1) Lower commodity prices. 2) Cost inflation. 3) Alaska discovery has less potential resources than expected. 4) Federal acreage exposure in Alaska. 5) Worse than expected well results in the Eagle Ford, Permian, and Bakken.

Upside and Downside Risks to Concho Resources

Upside: 1) Reduced operating and development costs. 2) Consistent execution. 3) Non-core divestitures, with cash returned to shareholders – highlighted by Morgan Stanley.

Downside: 1) Downside to Permian natural gas price differentials. 2) Elevated non-operated spending. 3) Regulation preventing development on Federal acreage.

Check out FX Empire’s earnings calendar

US Stock Market Overview – Stocks Slide Driven Lower by Communications on Stimulus Fears

 

US stocks moved lower on Monday as concerns that a stimulus deal would need to wait until after the November general election weighed on shares. House Speak Nancy Pelosi has given the White House a 48-hour timeline to move forward with a deal. The spread of COVID-19 has accelerated which is reducing the chance of a V-shaped recovery.

Over the past 2-weeks, the stock market has been starting higher and ending lower, which is not a good sign. All sectors in the S&P 500 index were lower, led down by communications and energy, utilities were the best performing sector in a down tape. The VIX volatility index surged higher rising 2-points and recapturing the 29% level. The US home building index released by the FAHB surged to the high level on record but the gain was not strong enough to buoy housing sector stocks on Monday.

Home Building Index Surges

Homebuilders continue to see expanding demand and are struggling to keep up with housing starts. The Homebuilder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80. This is a diffusion index with levels above 50 showing an expansion. The index stood at 71 in October 2019. All three components of the index either set records or matched their highest readings.

The current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74. Builders are struggling to ramp up production, and while housing starts and building permits are rising they are not even close to meeting demand.

Natural Gas Price Prediction – Prices Whipsaw as a Storm Enters the Caribbean

Natural gas prices whipsawed on Monday, making a lower low before rebounding sharply to close up on the trading session. Prices remain buoyed as the weather is expected to be much colder than normal through the plains and the mid-west while warmer than normal throughout most of the East coast of the United States. There is one disturbance moving through the Caribbean that has a 10% chance of becoming a tropical cyclone during the next 48-hours. Tropical storm Epsilon is expected to move toward the east coast of the US but is not likely to impact any natural gas infrastructure. Hedge funds added to long positions in futures and options according to the latest commitment of traders report.

Technical Analysis

Natural gas prices whipsawed and close higher on the session. Prices recaptured resistance which is now short-term support near the 50-day moving average at 2.76. Additional support is seen near the 10-day moving average at 2.72. Resistance is seen near the October highs at 2.95. The 10-day moving average is fast approaching the 50-day moving average and a crossover appears imminent. This would show that a medium-term uptrend is in place. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Hedge Funds add to Long Positions in Futures and Options

Managed money added to long positions and reduced short position in futures and options according to the latest commitment of traders report released for the date ending October 13, 2020. Managed money added 9K contracts to long position in futures and options while reducing short positions by 3K contracts. Hedge funds that are long futures and options outnumber short position in futures and options by 2.5 to one.

Gold Price Prediction – Prices Edge Higher on Strong Homebuilder Index

Gold prices continued to consolidate and attempted to move higher as the dollar declined. US yields moved higher which weighed on gold prices following a stronger than expected US Homebuilder Index. Concerns over the US general election and a surge in coronavirus cases in the UK have helped buoy the yellow metal. Gold volatility has eased and is currently trading near the lowest levels seen since the pandemic started to spread in February. Currently, gold “at the money” implied volatility is trading just shy of 21%.

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Technical analysis

Gold prices edged higher trading sideways and making little headway. Prices remain above short term support is seen near the 10-day moving average at 1,902. Resistance is seen near the 50-day moving average at 1,924. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal on the upper end of the neutral range. Medium-term momentum remains neutral as the MACD histogram prints in the black with an upward sloping trajectory that points to a slow trend higher.

Home Building Index Surges

Homebuilders continue to see expanding demand and are struggling to keep up with housing starts. The Homebuilder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80. This is a diffusion index with levels above 50 showing an expansion. The index stood at 71 in October 2019. All three components of the index either set records or matched their highest readings. The current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74.

USD/CAD Daily Forecast – U.S. Dollar Is Under Pressure At The Start Of The Week

USD/CAD Video 19.10.20.

Canadian Dollar Gains Ground On Strong Oil And U.S. Stimulus Hopes

USD/CAD is under pressure as the U.S. dollar is losing ground against a broad basket of currencies while WTI oil is trying to settle above the $41 level despite worries about the second wave of coronavirus in Europe.

The U.S. Dollar Index has managed to settle below 93.50 and tries to gain additional downside momentum on hopes for a new coronavirus aid package in the U.S.

According to recent reports, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin will resume negotiations today. Nancy Pelosi has previously set a deadline of October 20 for a vote in case Republicans and Democrats want to pass the new aid bill before the election.

Today, Canada reported that Wholesale Sales increased by 0.3% month-over-month in August. The report was fully in line with the analyst consensus.

This week, USD/CAD traders will have a chance to evaluate the latest inflation data from Canada which will be published on Wednesday. Inflation Rate is expected to grow by 0.4% year-over-year in September while Core Inflation Rate is projected to increase by 0.7%.

On Thursday, the Bank of Canada will announce its Interest Rate Decision and present its Monetary Policy Report. The rate is expected to stay unchanged at 0.25% so traders will focus on the Bank’s commentary about its plans to support the economy.

Technical Analysis

usd cad october 19 2020

USD to CAD managed to settle below the support at 1.3200 and developed material downside momentum. The nearest support level for USD to CAD is located at 1.3135.

In case USD to CAD moves below this level, it will head towards the next support level at October lows at 1.3100. A move below 1.3100 will open the way to the test of the support at 1.3050.

On the upside, the previous support at 1.3200 will likely serve as the first resistance level for USD to CAD. The 20 EMA is located in the nearby so this resistance level is set to be strong.

If USD to CAD settles above the resistance at 1.3200, it will gain upside momentum and move towards the next resistance at the 50 EMA at 1.3240.

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

Oil Gains Ground Despite Worries About Second Wave In Europe

Oil Video 19.10.20.

Oil Ignores New Restrictions In Europe

While many European countries have introduced various virus-related restrictions, most of them have avoided serious lockdowns. Wales, which is part of the UK, was the first one to announce a new lockdown in order to contain the second wave of the virus.

The lockdown will begin on Friday and last for two weeks. During this period, most citizens will work from home while all-non essential businesses will have to close.

Such lockdowns deal significant damage to oil demand but oil traders have managed to shrug off demand worries and continued to provide support to oil near the $40 level.

Perhaps, traders are betting that OPEC+ will keep current production cuts for some more months instead of increasing production levels by 2 million barrels per day (bpd) from January 2021.

Recent reports indicate that OPEC+ countries are worried about the current pace of oil demand recovery. OPEC+ cannot afford another collapse of oil prices because it will signal that it has lost control of the oil market.

In this light, OPEC+ members may be eager to suffer from lower production levels for a few additional months in order to show that OPEC+ is still the leading player in the market.

Libya’s Oil Production Increases To 500,000 Bpd

According to a recent Bloomberg report, Libya managed to restart its biggest oil field, Sharara, and increased its total production to 500,000 bpd. The increase of Libya’s production is another headache for OPEC+ since Libya is exempt from the production cut deal due to the civil war.

Sharara’s production capacity is about 300,000 bpd but current production is near 110,000 bpd. Thus, the field has plenty of room to increase production even if we take into account the potential damage done by the civil war. The continued increase in Libya’s oil production is certainly a negative catalyst for the oil market.

In addition to Libya, oil traders will pay attention to U.S. oil production as the recent Baker Hughes Rig Count report indicated that the number of U.S. rigs drilling for oil increased by 12 to 205.

Most likely, the upcoming EIA Weekly Petroleum Status report will indicate an increase in U.S. domestic oil production. If this increase is not met with higher demand, crude inventories will increase and put pressure on oil prices. Tomorrow, traders will have a chance to take a look at the latest inventory data since API Crude Oil Stock Change report will be released.

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

Natural Gas Price Fundamental Daily Forecast – Will Strengthen as LNG Demand Picks Up

Natural gas futures are trading nearly flat Monday after posting a whip-saw trade earlier in the session. The price action reflected the lack of clarity in the weather models and the timing of restored liquefied natural gas (LNG) movement in the Gulf area devastated by Hurricane Delta.

At 14:28 GMT, December natural gas futures are trading $3.281, up 0.010 or +0.31%.

Natural Gas Intelligence (NGI) reported that analysts at EBW Analytics Group attributed heavy selling in after-hours trading Friday to reports that clearing a sunken barge obstructing the Calcasieu Ship Channel could take three to four weeks, news that put a damper on the outlook for LNG exports out of the Cameron LNG terminal.

Bespoke Weather Services said the market “no longer seems concerned” about the situation of Cameron LNG despite seemingly nothing changing regarding the timeline for clearing the channel.

Short-Term Weather Outlook

According to NatGasWeather for October 19 to October 25, “Cool conditions linger across the Midwest and Ohio Valley in the wake of a weekend cold shot with highs of only 30s to 50s. Most of the rest of the US will be comfortable to warm w/highs of 70s and 80s besides locally hotter 90s over portions of California and the Southwest. Conditions will warm across the Great Lakes/Ohio Valley as the week progresses with highs of 60s & 70s, while still chilly over the Northern Rockies & Plains with 20s – 40s. Overall, national demand will be high today, then low Tuesday – Friday.”

US Energy Information Administration Weekly Storage Report

The EIA reported last Thursday that domestic supplies of natural gas rose by 46 billion cubic feet (Bcf) for the week ended October 9.

Total stocks now stand at 3.877 trillion cubic feet (Tcf), up 388 Bcf from a year ago, and 353 Bcf above the five-year average, the government said.

Natural Gas Intelligence (NGI) reported that “Ahead of the EIA report, a Wall Street Journal survey of 11 analysts expected injections to range from 47 Bcf to 65 Bcf, with an average build of 56 Bcf. A Bloomberg survey of seven market participants had a tighter range of projections, which produced a median of 53 Bcf. Reuters polled 14 analysts, whose estimates ranged from increases of 46 Bcf to 74 Bcf, with a median injection of 55 Bcf. NGI estimated a 54 Bcf injection.”

Based on the estimates, the report was construed as bullish, but the news wasn’t earth-shattering enough to suggest the notion of a prolonged rally.

Daily Forecast

The short-term weather outlook is confusing especially around the October 28 to November 1 time period, where temperatures could turn extremely cold or stay in an average range, depending on which forecast you want to follow.

This means the direction of the market will likely be determined by LNG demand. If producers can overcome the issues in the Gulf then we expect demand to strengthen, which should underpin prices and eventually fuel the start of a strong uptrend.

The combination of cold temperatures and strong LNG demand will be bullish.

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

Halliburton Posts Fourth Straight Loss in Q3 as Oil Rout Drags Demand

Halliburton Co, one of the world’s largest providers of products and services to the energy industry, reported a loss for the fourth consecutive time in the third quarter as demand slowdown due to the COVID-19 pandemic and lower oil prices have hurt businesses.

The U.S. largest hydraulic fracturing provider reported a net loss of $17 million, or $0.02 per diluted share, for the third quarter of 2020. This compares to a net loss for the second quarter of 2020 of $1.7 billion, or $1.91 per diluted share. Adjusted net income for the third quarter of 2020, excluding severance and other charges, was $100 million, or $0.11 per diluted share.

Halliburton’s total revenue in the third quarter of 2020 was $3.0 billion, a 7% decrease from revenue of $3.2 billion in the second quarter of 2020, the company said.

At the time of writing, Halliburton shares traded 3.55% higher at $12.68 on Monday; however, the stock is down about 50% so far this year.

Its rival, Schlumberger reported a loss for the third consecutive time in the September quarter as a prolonged period of lower crude prices due to COVID-19 disruptions caused clients to suspend drilling activities.

Executive comments

“The pace of activity declines in the international markets is slowing, while the North America industry structure continues to improve, and activity is stabilizing. We have a strong international business, a lean North America operation, and an efficient capital deployment strategy, all enabled by continued adoption of leading digital technologies that benefit our customers and Halliburton,” said Jeff Miller, Chairman, President and CEO.

“We believe executing on our strategic priorities will boost our earnings power reset and free cash flow generation today and as we power into and win the eventual recovery,” concluded Miller.

Halliburton stock forecast

Seventeen analysts forecast the average price in 12 months at $15.28 with a high forecast of $22.50 and a low forecast of $11.50. The average price target represents a 21.80% increase from the last price of $12.55. From those 17 equity analysts, five rated “Buy”, 11 rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $14 with a high of $20 under a bull scenario and $4 under the worst-case scenario. Halliburton’s stock price forecast has been raised by equity research analysts at Cowen and Company to $20 from $19.

Several other analysts have also recently commented on the stock. BMO Capital Markets initiated coverage on Halliburton, issuing a “market perform” rating and a $14 price objective for the company. Goldman Sachs Group raised Halliburton from a “buy” rating to a “conviction buy” rating in August. HSBC increased their stock price forecast to $13.70 from $9.50 and gave the company a “hold” rating in July.

Analyst Comments

“Outsized exposure to deteriorating North America (NAm) markets impacts Halliburton’s results more meaningfully vs. less exposed peers, in our view, and we continue to see greater downside revision risk for those focused on this market. Few bullets left to offset deteriorating fundamentals: Halliburton is winding down a major cost-cutting program in NAm, which suggests to us its ability to further cut overhead as US activity trends lower is limited,” said Connor Lynagh, equity analyst at Morgan Stanley.

“We believe the company’s exposure to areas in high demand (i.e. Ventilators, Patient Monitoring, CT and X-Ray) puts the company in an attractive risk-reward positioning relative to other companies in our sector over the next 12 months.”

Upside and Downside Risks

Upside: 1) Signs of a bottom in NAm pressure pumping activity and pricing. 2) International contract awards. 3) Bolt-on M&A – highlighted by Morgan Stanley.

Downside: 1) Further pricing pressure and activity declines, particularly in Nam. 2) Undisciplined project bidding. 3) Failure to deliver on cost savings goals. 4) Commodity price/cyclical risk.

Check out FX Empire’s earnings calendar

Silver Price Daily Forecast – Silver Starts The Week On A Strong Note

Silver Video 19.10.20.

Silver Attempts To Gain More Momentum Above The 50 EMA

Silver has managed to get above the resistance at the 50 EMA at $24.55 and is trying to gain additional upside momentum as the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index declined below 93.50 and is heading towards the nearest support level at 93.00 on hopes for a new coronavirus aid package deal. If the U.S. Dollar Index gets to the test of the 93 level, silver will get more support. Weaker dollar is bullish for silver as it makes it cheaper for buyers who have other currencies.

Meanwhile, gold is trying to settle above its 50 EMA at $1905. At this point, gold failed to develop material upside momentum but maintains solid chances to continue its upside move. If gold gets to the test of the next resistance at $1930, silver and other precious metals will get additional support.

Gold/silver ratio declined below the support at the 20 EMA at 77.95 which is bullish for silver. The next support level for gold/silver ratio is located at the recent lows near 75.50. A move towards this level will be a bullish development for silver.

Technical Analysis

silver october 19 2020

Silver is currently trying to get more momentum above the support at the 50 EMA at $24.55. If this attempt is successful, silver will head towards the next resistance level at the recent highs at $25.55.

Along the way, silver may face some resistance near the highs of today’s trading session at $25.00. If silver moves above the resistance at $25.55, it will quickly get to the test of the next resistance level at $25.85.

On the support side, the nearest support level for silver is located at $23.90. A move below this level will open the way to the test of the next support at $23.30.

From a big picture point of view, silver managed to get sufficient support near $24.00 and continues its upside move. If the U.S. dollar remains weak, silver will have good chances to get above the recent highs at $25.55.

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

Oil Price Fundamental Daily Forecast – IMF Doesn’t See Dramatic Price Recovery Anytime Soon

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading steady to lower on Monday shortly after the regular session opening, pressured by concerns over rapidly rising coronavirus cases globally and by supply worries after Libya announced plans to boost output.

At 13:13 GMT, December WTI crude oil is at $41.00, down $0.12 or -0.29% and December Brent crude oil is at $42.81, down $0.12 or -0.28%.

Crude oil prices are finding some support due to a weaker U.S. Dollar. Since crude oil is a dollar-denominated commodity, it tends to rise on foreign demand when the dollar weakens. The dollar is being pressured by renewed hopes for a U.S. fiscal stimulus package.

IMF Reveals 2021 Forecasts for Oil Prices and Middle East Economy

The International Monetary Fund (IMF) downgraded its outlook for Middle East and Central Asian economic recovery, predicting a 4.1% contraction for the region as a whole – 1.3 percentage points worse than its previous assessment in April – in its latest regional outlook report released Monday.

Jihad Azour, director of the IMF’s Middle East and Central Asia department, noted a large disparity in economic loss between oil importing and exporting countries as the region has been hit by the coronavirus pandemic and a plunge in oil prices.

Oil Prices Will Remain Under Pressure, IMF Says

Oil prices will be the most important factor for oil exporters’ recovery, particularly states like Saudi Arabia, Iraq, Iran, the UAE, Bahrain and Kuwait, for whom the commodity makes up the majority of revenue. While prices have recovered from their historic plunge in March of this year, international benchmark Brent crude is still trading nearly 40% below pre-pandemic levels.

And the IMF doesn’t see oil prices staging a dramatic recovery anytime soon, predicting prices in the $40 and $50 range in 2021. That’s still half the $80 per barrel figure OPEC kingpin Saudi Arabia needs to balance its budget, according to the fund.

“The projections for oil prices are in the corridor between $40 to $45 for … early next year, and will be between $40 to $50” next year overall, Azour said. “It think what is going to be also important to watch is the recovery in demand. That proved to be an important factor in what we saw this year, in addition to the supply that could come from alternative energies.”

Daily Forecast

The IMF also stressed diversification and continued coronavirus safety measures as key to strengthening the region’s economies, with a focus on providing opportunities for its youth population.

The reality is, at this time, there is no sign of the hoped for recovery. No signs of the coronavirus cases topping out, and no signs of a vaccine. All of these factors add up to lower demand.

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