GBP/USD Daily Forecast – Stabilization At The Start Of A Busy Week

GBP/USD Video 11.05.20.

GBP/USD Settles Near The 20 EMA Level

GBP/USD is little changed as the pair stabilizes following the rapid moves seen during the previous week.

On Monday, no material economic reports are scheduled for publication in U.S. and UK so GBP/USD dynamics will be influenced by technicals and the general market mood.

UK Prime Minister Boris Johnson outlined plans for gradual lifting of the lockdown measures including allowing citizens to exercise more than once per day and encouraging those who cannot work remotely to return to their workplaces.

However, the exit from the lockdown is set to be long and it remains to be seen whether the economic rebound will be fast enough to justify the recent market optimism.

In an alarming development, China’s Wuhan reported new coronavirus cases, raising questions about the potential second wave of the virus. In all likelihood, the markets will watch the Wuhan situation very closely.

The UK is set to provide first-quarter GDP Growth data on May 12 which will be the most important economic report of the week. Currently, analysts expect that GDP declined by 2.1% year-over-year and contracted by 2.5% quarter-over-quarter.

In the U.S., traders will once again focus on new Initial Jobless Claims report. The pace of job losses is expected to slow down, and the consensus is that 2.5 million Americans lost jobs during the previous week.

Technical Analysis

gbp usd may 11 2020

From a big picture point of view, GBP/USD continues to trade in a wide range between the major support level at 1.2250 and the major resistance level at 1.2650.

Currently, the pair has settled close to the nearest resistance area between the 20 EMA at 1.2420 and the 50 EMA at 1.2450. This is a material resistance level for GBP/USD, and the pair will likely gain upside momentum in case it manages to settle above it.

In this scenario, GBP/USD will head towards the test of the major resistance level at 1.2650, although it will first have to face resistance at 1.2500.

On the support side, the nearest support level is located at 1.2350. If this level is breached to the downside, GBP/USD will head towards the major support level at 1.2250.

 

USD/CAD Daily Forecast – Canadian Dollar Continues Its Upside Move

USD/CAD Video 08.05.20.

U.S. Employment Reports Provide Support For Riskier Assets

USD/CAD continues to trend down as oil shows strength and the U.S. dollar is losing ground against a broad basket of currencies.

The better-than-expected U.S. Non Farm Payrolls and Unemployment Rate reports have initially provided support to the American currency, but the U.S. Dollar Index failed to get above the 100 level and declined closer to 99.5.

The reports showed that job losses were smaller than previously expected, although the U.S. economy still lost as much as 20.5 million jobs and the Unemployment Rate skyrocketed to 14.7% as virus containment measures dealt a heavy blow to many industries.

However, the market got accustomed to worse-than-expected reports so the news was considered as a positive catalyst and led to increased buying of riskier assets like the Canadian dollar.

Oil continues to be a tailwind for the Canadian currency as traders believe that the worst is already behind and that the reopening of the world economy will improve the supply/demand balance in the oil market.

Other commodity-related currencies are also gaining ground against the U.S. dollar today highlighting the breadth of the current move.

Technical Analysis

usd cad may 8 2020

USD/CAD has breached the 50 EMA level at 1.3970 and heads towards the next support level which is located at 1.3850.

This level has previously been tested two times and USD/CAD swiftly rebounded after each attempt to get below this level. This time, USD/CAD should have more chances to settle below 1.3850 but I believe that some stabilization closer to this level could be required for a successful test of this major support.

In case USD/CAD manages to get below 1.3850, it will likely gain additional downside momentum and head towards 1.3750.

On the upside, the 50 EMA at 1.3970 will likely serve as the first resistance level for USD/CAD. If the pair manages to get above this level, it will have to deal with resistance at the 20 EMA at 1.4040.

The following resistance level is located at 1.4150, at the recent highs, while the ultimate resistance for the pair is at 1.4250. From a big picture point of view, USD/CAD continues to trade in a wide range between 1.3850 and 1.4250. At this point, a downside breakout looks more likely.

Oil Gains Ground On Signs That Demand Is Set To Increase

Oil Video 08.05.20.

Goldman Sachs Believes That Supply/Demand Balance Will Improve By Summer

Oil prices have enjoyed material upside in recent days as the world economies started to reopen and demand for oil began to increase.

Goldman Sachs has shared its new oil demand estimates. The company believes that oil demand decreased by about 30 million barrels per day (bpd) in mid-April, and that currently demand is down by 19 million bpd.

In June and July, Goldman Sachs expects that demand will be 12 million bpd lower compared to pre-crisis levels. In August, demand is set to be down 5 – 6 million bpd from “normal” levels.

While demand is set to increase, production will stay at lower levels due to the OPEC+ production cut deal and the continued production cuts from non-OPEC+ countries which are mostly dictated by production economics.

For example, the U.S. domestic oil production is already down to 11.9 million bpd according to the latest EIA Weekly Petroleum Status Report. Such production cuts are expected to continue as companies try to adapt to sub-$30 WTI prices.

The main problem for the market is to work through excessive oil inventories which continue to increase. The inventory overhang will serve as a major obstacle on oil’s path to levels above $30 per barrel.

Futures Curve Flattens As The Market Stabilizes

At this point, it looks like the previous problems with front-month contracts are over, and the marketplace has transferred to a healthier state.

In late April, the United States Oil Fund ETF announced its decision to rebalance into longer-dated contracts which led to panic in the June 2020 contract, but this panic likely marked the bottom for oil.

Since then, the front-month contract has recovered firmly above $20 and the futures curve has flattened as a result of this recovery.

Currently, WTI June 2020 contract is trading above $24 per barrel while September 2020 contract is just below $29 and December 2020 is at $31.

The market expects a gradual return to a new normal: the December 2021 contract is at the $35 level, and it looks like the oil inventory problem is material enough to make traders cautious about making bets on a stronger recovery in oil prices.

However, oil is famous for its volatility and unpredictability. We’ve seen oil close to $150 per barrel, and we’ve seen the front-month contract change hands at levels below zero. As usual, oil traders will have to stay glued to their screens searching for any hints on how the future supply/demand balance would look like.

 

Silver Price Daily Forecast – Silver Mixed After U.S. Non Farm Payrolls Report

Silver Video 08.05.20.

Silver Gets Back Below 50 EMA As U.S. Dollar Gains Ground After Employment Data

Silver tested the 50 EMA level at $15.40 and was trying to settle above $15.50 but better-than-expected U.S. Non Farm Payrolls and Unemployment Rate data pushed it back below the previous resistance as the reports provided support for the U.S. dollar.

U.S. dollar strength is a bearish catalyst for silver as it makes silver more expensive for buyers who have other currencies.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is currently close to the 100 level after trending towards 99.5 before the release of the U.S. employment data.

Gold is losing ground after the employment reports but is still above $1700 per ounce which is a bullish sign for the whole precious metal segment.

I’d note that the spread between spot gold prices and futures gold prices has significantly decreased over the recent weeks, signaling the normalization of the marketplace.

The same is true for silver which also had a significant spread between spot prices and futures prices at the acute phase of the coronavirus crisis.

Technical Analysis

silver may 8 2020

As I wrote yesterday, silver’s move above $15.00 paved the way for a test of the 50 EMA level at $15.40. Silver enjoyed robust upside momentum and breached the $15.40 level to the upside.

Unfortunately for silver bulls, the U.S. employment data provided material support for the U.S. dollar and put pressure on silver. Due to these developments, silver returned back below the 50 EMA level.

In case silver stays below the 50 EMA during today’s trading session, its voyage above $15.50 would be counted as a fake breakout, which is unpleasant but not decisive as silver bulls will likely have another chance to take silver closer to April highs.

If silver manages to settle above $15.50 despite the current setback, it will likely develop material upside momentum and quickly move to test the April highs at $15.80.

In this scenario, silver will have a good chance to get to pre-crisis levels at $16.50.

On the support side, the nearest material support for silver is located at $14.60. I would not count much on support near $15.00 although silver may still pause there in case of a downside move.

If the support at $14.60 is breached to the downside, silver will develop robust downside momentum and its next goal will be the support area near $14.00.

 

U.S. Stocks Set To Open Higher As U.S. Loses Less Jobs Than Expected

Non Farm Payrolls And Unemployment Rate Reports Are Better Than Expected

The U.S. has just released the April data on Non Farm Payrolls and Unemployment Rate. These reports are the culmination of this week’s employment data which started with ADP Employment Change report on Wednesday.

Non Farm Payrolls report showed that the U.S. lost 20.5 million jobs which was better than the analyst consensus which called for a 22 million job loss.

The Unemployment Rate was also better than expected at 14.7% compared to analyst consensus of 16%.

Following the news, S&P 500 futures are gaining more than 1% in the premarket trading session. A better than expected employment data could provide an additional boost for stocks which have previously ignored various disappointing reports.

U.S. – China Relations Are Not As Bad As Feared

In recent days, market digested news about the potential U.S. plans to retaliate against China due to coronavirus. According to various reports, such plans could include tariffs and even sanctions.

In this light, the fate of the trade deal between U.S. and China was under question. In a major positive development, U.S. and China have agreed to strengthen cooperation for the first phase of the trade deal.

Any escalation in a trade war between the two biggest economies of the world will come at the worst possible time as the world economy tries to recover from the acute phase of the coronavirus crisis. Thus, positive news on the trade war front are bullish for the markets.

Shanghai Disneyland Sells All Tickets For First Days After Its Reopening

One of the biggest investor fears nowadays is that life will not return to normal for several years as consumer behavior will be altered by fears of catching a virus.

China is the first big economy that is on path to recovery from coronavirus pandemic so investors watch the behavior of Chinese consumers closely.

Shanghai Disneyland enjoyed huge demand for tickets for the park’s reopening. It should be noted that the park was mandated to cap capacity at 30% but it’s still a big success and a positive sign for the whole world which gradually lifts virus containment measures.

GBP/USD Daily Forecast – British Pound Continues To Rebound

GBP/USD Video 08.05.20.

All Eyes On U.S. Non Farm Payrolls Report

GBP/USD had a very volatile session yesterday and tested both the resistance at the 20 EMA at 1.2420 and the support above 1.2250.

Today, the pair is back to the upside mode as the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has once again declined below the 100 level and stays in the range between 99 and 101. A move out of this range will signal that the U.S. dollar is ready for bigger moves against other currencies.

Yesterday, U.S. Initial Jobless Claims report showed that 3.2 million Americans filed for unemployment benefits in one week, while the Continuing Jobless Claims report showed that 22.6 million Americans were still unemployed.

Today, the market will focus on U.S. Non Farm Payrolls and Unemployment Rate for April.

The Non Farm Payrolls report is expected to show a loss of 22 million jobs. It should be noted that the report is not a snapshot of the current situation but it is still very important as it helps traders and investors understand what’s going on in the job market.

The Initial Jobless Claims report shows all filings but some of the laid off workers may have found new jobs in more active areas like delivery services.

Meanwhile, the Unemployment Rate report is expected to show that unemployment rate reached 16% in April. Both reports will likely have a material impact on the GBP/USD dynamics and impact other markets.

Technical Analysis

gbp usd may 8 2020

GBP/USD continues to trade in a very wide range between the support level at 1.2250 and the resistance level at 1.2650. The support level got tested yesterday, and GBP/USD received material buyer support and quickly rebounded.

The nearest resistance for GBP/USD is located at the 20 EMA at 1.2420, followed by the 50 EMA at 1.2450. I believe that the area between 1.2420 and 1.2450 will serve as one major resistance level for the pair.

In case GBP/USD is able to settle above this level, it will likely gain additional upside momentum and head towards the recent highs at 1.2650.

On the support side, the nearest major level is at 1.2250. The pair will first have to settle closer to 1.2250 before it gets a realistic chance to breach this level to the downside.

USD/CAD Daily Forecast – Oil Price Upside Provides Support For The Canadian Dollar

USD/CAD Video 07.05.20.

Canadian Dollar Gains Ground On A Good Day For Riskier Assets

USD/CAD is correcting following the previous upside move as oil is gaining ground again, providing a boost to the Canadian dollar.

The U.S. Dollar Index has firmly settled above the psychologically important 100 level following the release of a disappointing Initial Jobless Claims report which showed that 3.2 million Americans filed for unemployment benefits.

The Continuing Jobless Claims report was worse than expected and showed that 22.6 million Americans were without jobs. The report’s data lags the Initial Jobless Claims data by one week.

This news provided support for the U.S. dollar as it continues to play a role of a safe haven asset of last resort but did not stop traders from buying riskier assets like equities or commodity-related currencies like the Canadian dollar.

In Canada, Friday will be a very data-heavy day as data for Unemployment Rate and Housing Starts  is set to be released.

Unemployment Rate is expected to jump to 18% compared to the previous reading of 7.8%. Housing Starts are expected to come at 110,000 compared to 195,000 in the previous month.

Lately, the oil price dynamics have played a decisive role for USD/CAD trading, and this pattern is likely set to continue for the upcoming days.

Technical Analysis

usd cad may 7 2020

USD/CAD failed to settle above the resistance level at 1.4150 and fell below the 20 EMA at 1.4060. The pair’s failure to get above 1.4150 confirmed the pattern of lower highs, and USD/CAD stays in the downside channel.

The nearest support for the pair is located at the 50 EMA at 1.3970. In case USD/CAD manages to get below the 50 EMA, it will likely head towards the major support level at 1.3850.

This level has already been tested two times, and each attempt to breach this level was met with increased buying activity. However, the current pattern of lower highs increases risk that the third attempt to get below 1.3850 may be successful.

On the upside, the nearest material resistance for USD/CAD is at 1.4150, followed by a major resistance at 1.4250. At this point, it is clear that USD/CAD will need very material upside catalysts to get above 1.4250.

 

Oil Rallies As Saudi Arabia Increases Prices For Customers

Oil Video 07.05.20.

Saudi Aramco Raises June Prices For Asian Clients

Oil is gaining ground today as Saudi Aramco increased prices for Asian clients. Pricing for EU and U.S. customers were increased as well.

Previously, Saudi Aramco offered material discounts as it tried to gain market share in a price war with Russia. However, the coronavirus pandemic dealt an additional blow to the oil market, and the leading oil producers have managed to agree to a production cut deal.

Now that these production cuts are implemented, Saudi Aramco is ready to increase prices. It should be noted that big oil producers sell their oil on contracts whose pricing may differ materially from the prevailing futures pricing.

Saudi Aramco’s move may signal that the worst is already behind, and that the negative pricing reached by the May 2020 contract will stay a historic curiosity and will not repeat again.

However, the current oil rally may face material obstacles as the spread between the front-month contract and longer-dated contracts gets tighter, signaling that the market is not very optimistic about a robust oil price recovery.

China Oil Imports Rebound In April

A surge in China Exports is providing a boost to global markets today. At the same time, a recent Reuters report suggested that China’s crude oil imports increased by 9.84 million barrels per day (bpd) in April.

This data signals increased appetite for crude oil as China’s economy starts to recover from the coronavirus crisis. It is highly likely that this increase in activity has allowed Saudi Aramco to boost prices as it saw improved demand.

The market is clearly extrapolating the data from China to the situation in the U.S. and EU which are reopening their economies. A faster-than-expected rebound in oil demand will eliminate the fears related to the availability of the oil storage and provide additional support for oil prices.

However, it’s too early to make the final call as the recent inventories reports showed continuous increase in oil inventory levels as demand is still much lower than available supply.

The U.S. production is trending down but the pace of this trend is currently not sufficient enough to prevent domestic inventories from further increases.

In the near term, the market will likely focus on data about the pace of the oil demand recovery while it will continue to keep a close eye on U.S. oil inventory levels.

Silver Price Daily Forecast – Silver Gets Back Above $15.00

Silver Video 07.05.20.

Silver Enjoys Boost From Global Market Optimism

Silver has found material support above $14.60 and managed to climb back above the 20 EMA at $15.05.

Most markets are in the green today following the positive China Exports data, and precious metals also get their fair share of market support.

Gold is trying to climb back above the key $1700 level following yesterday’s pullback while platinum and palladium are also gaining ground.

The U.S. has recently released its new Initial Jobless Claims report which was below expectations but did not lead to any kind of a sell-off as the markets seem to be ready to face additional bad data.

It remains to be seen how long such pattern would last but it is bullish for silver which does not enjoy the status of the safe haven asset of last resort.

The U.S. dollar is mostly flat today but the U.S. Dollar Index stays above the psychologically important 100 level.

For silver, a pause in the U.S. dollar upside is welcome since stronger U.S. dollar is a bearish catalyst for precious metals as it makes them more expensive for buyers who have other currencies.

Technical Analysis

silver may 7 2020

Silver got back above the 20 EMA at $15.05 and has a chance to settle in a new range between the 20 EMA and the 50 EMA at $15.40. The spread between the 20 EMA and the 50 EMA continues to narrow which signals that we can expect some more decisive action in the upcoming few weeks.

Now that silver is back above $15.00, it has a good chance to test the 50 EMA level. If this test is successful, silver will likely gain additional upside momentum and head to test April highs at $15.80.

In addition, the successful test of the 50 EMA level will signal the end of the local downtrend and the resumption of the upside momentum which can take silver to pre-crisis levels at $16.50.

On the support side, the area above $14.60 is the major support level for silver. In case this level is breached to the downside, silver will gain robust downside momentum as many traders who bet on silver upside will head to exits, creating a selling wave.

 

U.S. Stocks Set To Open Higher As China Export Data Is Better Than Expected

U.S. Initial Jobless Claims Report Is Worse Than Expected

U.S. has just released its new Initial Jobless Claims report which showed that 3.2 million of Americans filed for unemployment benefits in a week compared to analyst consensus which called for 3 million of such applications.

Continuing Jobless Claims were much higher than expected and showed that 22.6 million of Americans were still unemployed. Analysts expected that Continuing Jobless Claims will be less than 20 million.

It should be noted that Continuing Jobless Claims data lags Initial Jobless Claims data by one week, so it is highly likely that the situation on the Continuing Jobless Claims front has deteriorated even more.

S&P 500 futures are still pointing to a higher open but they gave up some of the premarket gains due to the disappointing employment data.

Export Data From China Supports Markets

China Exports data showed that exports increased last month, and this unexpected development provided a boost to global markets.

It remains to be seen whether the upside trend in China exports will be robust as the country’s clients were heavily hit by the coronavirus pandemic.

However, both Europe and U.S. are starting to reopen their economies so the situation should get better in May.

I’d note that the markets eagerly rise on anything that can be counted as good news which highlights the underlying bullishness which is most likely caused by unprecedented stimulus measures from governments and central banks.

Oil Continues Its Upside Move

Oil is back into the green zone following yesterday’s pullback as the above-mentioned data from China and production cuts fuel oil traders’ risk appetite.

Oil-related companies are an important part of the market so upside in oil helps S&P 500 gain more ground. The spread between the front-month WTI contract and longer-dated contracts continues to narrow which indicates that the oil market is gradually stabilizing.

Additional upside on the oil price front may provide more support for the general market and push it closer to recent highs. So far, the poor economic data was not able to hurt the current market rebound, and this trend looks set to be continued today.

GBP/USD Daily Forecast – British Pound Gains Ground After Bank Of England Keeps Rate Unchanged

GBP/USD Video 07.05.20.

U.S. Initial Jobless Claims Report Is The Next Important Data Point Of The Day

Bank of England has just announced its interest rate decision and provided an update on its monetary policy.

As expected, the rate was kept at 0.1% since there is no sense to push it into the negative territory. The decision was unanimous.

At the same time, the Bank of England maintained its additional program of purchasing of 200 billion pounds worth of UK government bonds and sterling non-financial investment-grade corporate purchases.

Currently, the British quantitative easing program totals 645 billion pounds and it will stay at this level until the next interest rate decision. Interestingly, the vote was not unanimous as two members wanted to increase the quantitative easing program by 100 billion pounds.

In the U.S., traders will focus on the upcoming Initial Jobless Claims report. Analysts expect that 3 million Americans filed for unemployment benefits last week, taking the total number of people who lost their jobs during the coronavirus crisis to more than 33 million.

U.S. Continuous Jobless Claims report also presents material interest since it will show how many people who have previously lost their jobs managed to find new jobs in areas of the economy which were not hit hard by the pandemic.

The analysts expect that Continuous Jobless Claims will be close to 18 million. Note that the Continuous Jobless Claims data lags the Initial Jobless Claims data by one week.

Technical Analysis

gbp usd may 7 2020

GBP/USD is rebounding from the support level near 1.2300. The nearest resistance for the pair is located at the 20 EMA at 1.2420, followed by the resistance at the 50 EMA at 1.2450.

In all likelihood, the area between the 20 EMA and the 50 EMA will serve as one major resistance level rather than two separate ones, so GBP/USD will have to settle above the 50 EMA to continue the upside move.

In this case, GBP/USD will have another chance to test the resistance level at the recent highs at 1.2650. This level has already been tested two times but each attempt happened after a material upside move with no pullbacks, so chances to get past 1.2650 without stabilization below this level were slim.

On the support side, the breach of the support level at 1.2300 will lead to a test of the next support level at 1.2250.

USD/CAD Daily Forecast – Canadian Dollar Loses Ground As Oil Pulls Back From Recent Highs

USD/CAD Video 06.05.20.

Stronger U.S. Dollar And Lower Oil Boost USD/CAD

USD/CAD is gaining ground as continued U.S. dollar strength against a broad basket of currencies and weakness on the oil price front create a perfect setup for USD/CAD upside.

The U.S. Dollar Index has breached the psychologically important 100 level and heads towards major resistance at 101.

The U.S. has recently released ADP Employment Change report for April which highlighted the huge hit to employment due to coronavirus containment measures, and the U.S. dollar received additional support as the safe haven asset of last resort.

Recently, Canadian heavy oil had a material rebound due to supply cuts but it remains to be seen whether this rebound is sustainable. Currently, the Canadian Crude Index is losing ground together with major benchmarks like WTI and Brent as traders take profits after the recent rally.

From a fundamental point of view, another increase in demand for safe haven assets may push USD/CAD above the major resistance level at 1.4250, but it is unclear whether such increase will happen despite the bad economic data that we get on a daily basis.

The markets look into the future rather than the past, and the current consensus implies that the massive stimulus measures from the world’s governments and central banks will ensure a speedy recovery from the deep crisis.

In case actual economic data contradicts this narrative, USD/CAD may experience another major upside move.

Technical Analysis

usd cad may 6 2020

USD/CAD is currently trying to settle above the resistance at 1.4150. In case the test of this level is successful, the pair will head towards the major resistance level at 1.4250.

USD/CAD will likely need significant upside catalysts to breach the resistance at 1.4250 but if it happens, the pair may quickly find itself at the next resistance level at 1.4330.

In case the test of the 1.4150 level is not successful, the current local downside channel will stay intact.

In this case, the next support for USD/CAD is located at the 20 EMA at 1.4060, followed by the 50 EMA at 1.3970. The ultimate support for the pair is at 1.3850. In case USD/CAD manages to get below this level, it will likely gain rapid downside momentum.

Oil Pulls Back After The Major Rally

Oil Video 06.05.20.

Oil Inventories Continue To Grow

Initially, oil ignored yesterday’s API Crude Oil Stock Change report which showed that crude oil inventories have increased by 8.44 million barrels but later found itself under pressure as traders decided to take some profits off the table after a major rally.

The EIA Weekly Petroleum Status Report has just been released, and it showed that crude oil inventories have increased by 4.6 million barrels, while gasoline inventories declined by 3.2 million barrels and distillate fuel inventories grew by 9.5 million barrels.

The most watched number – crude oil inventories – was better than expected and caused a temporary spike in the price of oil, but the increase in distillate fuel inventories clearly shows that the market is not out of the woods yet.

There are some improvements on the production side as domestic oil production declined from 12.1 million barrels per day (bpd) in the previous week to 11.9 million bpd.

A steady decline in the domestic oil production is required to improve the supply/demand balance as it is hard to expect that demand will increase so fast that no additional production cuts will be necessary.

At this point, the domestic oil production continues to decline naturally as oil producers get rid of their uneconomic production. Given the current oil prices, this trend is set to continue.

How Long Will The Rally Last?

The front-month June 2020 contract for WTI had a major rally from recent lows as traders believed that the situation with oil storage was not as dire as previously feared.

In essence, the front-month contract was closing the spread with longer-dated contracts. However, the December 2020 contract indicates that additional upside may be hard to achieve in the near term as it stays not far from the $30 level.

This means that the market is still cautious about the prospects of the demand recovery. In addition, the market will face a problem of an inventory overhang even the when the supply/demand balance situation improves.

The current correction is normal from a technical point of view since the front-month contract had a major rally from lows without any meaningful pullbacks. However, it remains to be seen whether the next week’s data on oil production and inventories will allow the rally to continue.

Silver Price Daily Forecast – Silver Mixed Despite Stronger U.S. Dollar

Silver Video 06.05.20.

Silver Remains Range-Bound And Trades Close To $15.00

Silver continues to trade below the 20 EMA near $15.00 but stays well above the key support level at $14.60. The equity market is optimistic despite disappointing ADP Employment Change data, but this optimism is not widespread today.

Oil is declining after the recent rally while gold is losing ground as well. At this point, the key question for gold is whether it will be able to settle above $1700 per ounce.

In this scenario, I’d expect an additional flow of money into the whole precious metal segment which will be bullish for silver. Meanwhile, weaker gold is a bearish factor for silver.

The U.S. dollar is also not helping silver upside today as the U.S. Dollar Index has breached the 100 level, and the American currency continues to strengthen against a broad basket of currencies.

Today, the market setup is unfavorable for silver but it stays close to the $15.00 level which highlights the continuous demand above $14.60.

More robust action can be expected tomorrow as the U.S. will release its weekly Initial Jobless Claims report which has had a material impact on various asset classes during the coronavirus crisis.

The report is guaranteed to look grim as the economy is hit hard by virus containment measures but market’s reaction to bad data is still a mystery as Fed’s major involvement via unlimited QE has distorted the marketplace.

Technical Analysis

silver may 6 2020

Silver continues to trade in the range between the support level at $14.60 and the resistance level at $15.50, although it is currently stuck between $14.60 and the 20 EMA near $15.00.

The local trend is to the downside, but silver is still in the rebound phase from a big picture point of view. In case silver manages to settle above the 20 EMA, it will have a good chance to test the 50 EMA level and to continue the rebound, which may ultimately lead to a test of pre-crisis levels at $16.50.

The breach of the support level at $14.60 will likely lead to a rapid downside move as many traders have had the time to establish speculative positions above $14.60 and will likely head to exits if silver dips below this level.

U.S. Stocks Set To Open Higher Despite Another Disappointing Employment Report

ADP Employment Report Shows A 20 Million Hit To Employment

This week will be full of employment data, and ADP Employment Change for April is the first report on this front. It showed a decline of 20.3 million compared to estimates which called for a decline of 20 million.

The news is hardly surprising given the previous U.S. Initial Jobless Claims reports but may still impact the market mood. On Thursday, a new Initial Jobless Claims report will be published. This time, it is expected to show that 3 million Americans filed for unemployment benefits last week.

On Friday, the market will digest the Non Farm Payrolls report for April which is expected to come at -21 million. Previously, the market mostly ignored bad employment data but it may become a more challenging task now as stocks have gone a long way from mid-March lows and trade at rather rich valuations.

Oil Corrects After The Recent Upside Move

Rising oil was a major supportive catalyst for the general market. The WTI June 2020 contract has recently traded close to $10 per barrel but has rallied off lows and even tested the $26 level.

Yesterday, API Crude Oil Stock Change report showed that oil inventories increased by 8.44 million barrels which was higher than analyst expectations. Initially, this report did not cause a sell-off since traders were hopeful that the gradual lifting of lockdown measures would boost oil demand.

However, it looks like oil has gone too far too fast, and it’s time for a technical correction. Oil stocks have done fairly well during the recent oil rally, and a correction on the oil price front might impact both the energy segment and the general market mood.

European Commission Expects That EU GDP Will Contract By 7.5% In 2020

European Commission has announced its first EU GDP forecast since the beginning of the crisis, calling for a contraction of 7.5% in 2020. This estimate is fully in line with the previously released estimate of the International Monetary Fund.

For the U.S., IMF expected a contraction of 5.9% in 2020. The recently announced European PMI numbers look grim, and even the traditionally strong Germany saw its Services PMI decline to new depths during the current crisis.

The weakness of the EU economy may at some point become a problem for U.S. multinationals but a lot will depend on the pace of the economic rebound both in the U.S. and the EU.

U.S. Stocks To Watch Today

General Motors

General Motors is set to provide its earnings report today before the market open. Analysts expect that the company will report revenue of $31.37 billion and profit of $0.34 per share.

The main intrigue is how the company plans to deal with the current crisis. The coronavirus containment measures dealt a heavy blow to the auto industry, and it’s not surprising that General Motors shares lost more than 40% of their value since the beginning of this year.

Recent reports suggest that General Motors wants to raise an additional $2 billion via a loan to boost its liquidity, but this has not yet been confirmed by the company. In all likelihood, General Motors will provide an update on liquidity measures during the upcoming earnings call.

The sales guidance is also of outmost importance as traders and investors try to guesstimate how much actual damage was done during the recent months and whether the company can mitigate this damage via increased sales after the end of virus containment measures.

Shopify

Shopify is one of the stocks that rallied due to the pandemic as consumers switched to online shopping options as brick-and-mortar stores were unavailable.

The company will provide its quarterly report today before the market open. The analyst consensus calls for revenue of $443 million and loss of $0.17 per share.

In all likelihood, the market will ignore the profitability metric and focus on the top line growth. However, the expectations are high as Shopify shares are up more than 70% year-to-date and have reached their all-time highs during the most recent trading session.

In case Shopify results fail to meet expectations, I’d expect a rapid sell-off as the stock’s valuation implies flawless execution.

Activision Blizzard

Activision Blizzard provided its quarterly results yesterday after the market close. The company reported revenue of $1.79 billion and profit of $0.65 per share, beating analyst estimates.

Activision Blizzard benefited from stay-at-home orders and success of the new Call of Duty which was released in March. As the lockdowns continued in April, the positive business environment remained intact.

The company expects that the strong momentum will continue and raises the outlook for revenue and earnings per share for the full year.

Before the earnings report, Activision Blizzard shares were up about 15% year-to-date. The market has positively reacted to the news, and the stock gained ground during the after-hours trading session. This trend may continue in the regular trading session.

USD/CAD Daily Forecast – Strong Oil Boosts Canadian Dollar

USD/CAD Video 05.05.20.

Canadian Dollar Gains Ground On A Strong Day For The U.S. Dollar

USD/CAD is in a pullback mode despite the broad U.S. dollar strength as it is offset by a major rally in the oil market. The Canadian oil is enjoying an especially strong boost due oil sands production cuts.

The U.S. Dollar Index has enjoyed upside today despite the general market optimism and is located close to the 100 level.

Traders have recently had a chance to evaluate Markit Composite PMI Final and Markit Services PMI Final which came below expectations at 27.0 and 26.7 respectively.

PMI data highlights a big blow to the economy and supports the U.S. dollar which serves as the safe haven asset of last resort during the current crisis.

Interestingly, oil, equity markets and the U.S. dollar enjoy upside on the same day, although in USD/CAD case the broad U.S. dollar upside does not help because of the notable gains on the oil price front.

In my opinion, the recent market action highlights traders’ confusion about the future economic situation since the safe haven asset like the U.S. dollar and the riskier assets like stocks or commodity-related currencies are enjoying upside on the same day.

Technical Analysis

usd cad may 5 2020

USD/CAD continues to trade in a wide range between the major support level at 1.3850 and the major resistance level at 1.4250. At the same time, a pattern of lower highs has been formed, and the pair is currently trending down in a wide downside channel.

The nearest material support level for USD/CAD is located at the 50 EMA at 1.3965, although the pair may get some support near 1.4000. If USD/CAD settles below the 50 EMA, it will head towards the major support level at 1.3850 which has already been tested two times.

Previously, USD/CAD quickly rebounded from 1.3850 but the third test could have more chances to succeed.

On the upside, the nearest material resistance is located at the recent highs at 1.4150. If USD/CAD is able to get above this level, it will move towards the test of the major resistance level at 1.4250. I maintain my view that USD/CAD will need very strong catalysts to get above the resistance at 1.4250.

Oil Rallies On Hopes That Oil Demand Will Start To Rebound

Oil Video 05.05.20.

First Signs Of Increased Energy Usage Push Oil Higher

Oil traders are betting on the increase in oil demand as global economies start to reopen, and oil continues its massive rally from recent lows. The upside is most visible in the front-month June 2020 contract, but longer-dated contracts show very healthy gains as well.

The market completely ignored the failure of the Texas Railroad Commission to  vote on the proposed cuts of 1 million barrels per day (bpd) as it believed that such cuts would occur naturally.

The mandated cuts proposal was backed by some shale oil companies but opposed by oil majors like Exxon Mobil and Chevron who have more resources to deal with the current crisis.

Potentially, oil majors wait for the acute phase of the crisis at smaller independent firms to scoop up their assets at cheap prices.

Anyway, U.S. oil production will continue to decline despite the recent upside in the oil market because prices stay at very low levels. The front-month contract is trading above $24 per barrel, while the December 2020 contract is valued at $31 per barrel.

These levels are well below the breakeven levels of many oil wells so production is set to decline naturally.

Inventory Reports Will Test The Recent Upside Move

The recent upside move will soon be tested as API Crude Oil Stock Change will be reported today after the U.S. stock market close while EIA will publish its Crude Oil Stocks Change tomorrow.

The current analyst consensus calls for an 8.125 million increase in crude oil stocks. The other important part of the EIA Weekly Petroleum Status Report is the information on domestic oil production.

Last week, production totaled 12.1 million bpd, and the upcoming report will likely show that it fell below 12 million bpd.

A decrease in domestic oil production is very important to improve the supply/demand balance and reduce the weekly inventory build as some major components of oil demand like air traffic are not coming back anytime soon due to fears about the second coronavirus wave.

The speed of the oil demand rebound is very hard to determine so traders should expect elevated oil price volatility in the upcoming weeks.

 

Silver Price Daily Forecast – Silver Holds Above Key Support At $14.60

Silver Video 05.05.20.

Silver Gains Ground Despite U.S. Dollar Strength

Silver continues to trade above the key support level at $14.60 despite the stronger U.S. dollar as global market optimism provides support for many asset classes.

The U.S. dollar is certainly a headwind for silver today as the U.S. Dollar Index continues to rebound from the 99 level and has already tested the 100 level.

Currently, the U.S. Dollar Index is in the range between 99 and 101, and a breakout from this range may lead to increased momentum and serve as an important catalyst for silver.

Meanwhile, gold is trading near the $1700 level as it fails to get additional upside momentum. In my opinion, the unprecedented monetary stimulus from the world central banks will continue to serve as an important bullish factor for gold but it looks like gold will need some additional near-term catalysts to continue its upside move.

The absence of gold price upside makes it hard for silver to rally but I’d note that the support at $14.60 looks strong and suggests that there is still significant buyer interest in silver despite the recent pullback.

Technical Analysis

silver may 5 2020

Silver trades below the 20 EMA near $15.00 and the local trend is to the downside as it moves in a rather tight downside channel. Recently, silver had a decent chance to get above resistance at $15.50 but it did not use it, lost momentum and is currently drifting towards the major support at $14.60.

The $14.60 level is a very important support level for silver which has already been tested many times. In case silver manages to settle below this support level, it will gain additional downside momentum and head towards the next support area at $13.80 – $14.00.

Currently, silver is still in the rebound phase although it has been in a pullback mode since mid-April. The breach of the $14.60 level will put this rebound to an end, and a new downside trend will begin.

On the upside, silver faces resistance at the 20 EMA near $15.00 followed by the 50 EMA near $15.50. If silver manages to get above these resistance levels, it will likely gain additional upside momentum and quickly head towards the test of the April highs at $15.80. In this scenario, a successful test of these highs looks likely.

U.S. Stocks Set To Open Higher As World Economies Continue To Reopen

Countries All Over The World Lift Some Virus Containment Measures

S&P 500 futures are gaining more than 1% in premarket trading session as traders and investors cheer the reopening of the world economies.

The coronavirus containment measures put incredible pressure on the world economy, and there is a sense of urgency to reopen as soon as possible to prevent further economic damage.

However, the reopening will be gradual to avoid the potentially devastating second wave of the virus. In the upcoming weeks, the market will focus both on the speed at which the economy reopens and also on whether coronavirus is kept in check as the economic activity increases.

Oil Continues Its Upside Move

Oil rallies as oil traders focus on the reopening of the world economy while fears about the availability of oil storage are put aside.

Front-month contracts for both WTI and Brent are experiencing the biggest upside moves but longer-dated contracts are gaining ground as well.

Major oil stocks have held reasonably well during the current earnings season despite some dividend cuts from Royal Dutch Shell or Equinor, and the continuation of the oil price rally may lead to additional gains for the shares of oil majors.

More Economic Data To Digest

The current market optimism will soon get tested by another portion of economic data. Later in the day, traders and investors will get a chance to evaluate Markit Composite PMI Final  and Markit Services PMI Final for April.

The Composite PMI is expected to decline from 40.9 in March to 27.4 in April, while the Services PMI is expected to shrink from 39.8 in March to 27.0 in April.

It remains to be seen whether the negative data will be able to put the current upside under question although a negative surprise on the PMI front might be dangerous for stocks.

I’d note that the U.S. dollar, which serves as the safe haven asset of last resort during the current crisis, is gaining ground against a broad basket of currencies despite the optimism in many asset classes.

This signals that investors are not sure whether the recent gains are sustainable as the market will have to face months of challenging economic data.