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SebsCubs

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Main market drivers on May 15


15.05.2020

All eyes on the US-China relationship that set the market mood. How is it today?
Chinese industrial output upbeats expectations

The day has started with an encouraging Chinese report. Industrial production increased by 3.9% that signalized a strong recovery in supply. However, the country still struggles with a weak demand: retail sales decreased by 7.5% and fixed asset investment contracted by 10.%. Investors are looking closely at China as it was the ‘first out’ economy from COVID-19. That’s why they can roughly predict the pace of a future recovery of other countries. The Chinese data reveals only little and gradual improvements in economic activity. Moreover, it has proved that the government stimulus really works.
Tense US-China relationship

The worsening US-China relationship outweighed the mixed Chinese data. Donald Trump doesn’t have any intentions to improve the tough situation. He said that he could cut ties with China, it was the day after the US federal pension fund delayed investment in Chinese shares. That’s why the Chinese yuan didn’t react to the improvement in industrial output. If the price reaches 7.11, it can possibly fall further to 7.1. Resistance levels are at 7.129 and 7.149.

Oil is heading for a third weekly gain

Despite the market uncertainty, the crude oil market has been slowly rebalancing as major producers cut supply. Also, economies started to reopen and, as result, demand has been gradually increasing. Elsewhere, Saudi Aramco decreased its sales to key buyers that also pushed the oil price higher. Nevertheless, oil is still down more than 50% this year. The way of recovery seems to be long and slowly.

Let’s look at the WTI oil chart. The price has been strongly ramping up since the end of April. It reached the recent April high at 28. The next barrier to the way up will be at 35. Support levels are at 23 and 20.

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What moves the market on May 18?


18.05.2020

The day started with the poor data from Japan. The country officially fell into a recession, that’s likely to deepen further as consumers limit their spending, companies cut back on investment, production and hiring stay at low levels amid the coronavirus.

As we can see, USD/JPY didn’t react so much, it slightly moved up after the report. We shouldn’t forget that the Japanese yen is a safe haven, as well as USD. That’s why it’s hard to tell which way the USD/JPY will go this week as investors use both currencies for a safe-haven protection.

Let’s look at the chart. If the USD/JPY increases and crosses the resistance line at 107.45, it will open doors further to the next one at 107.7. Support levels are at 106.9 and 106.6.

Even so, futures on the S&P 500 climbed. It’s strange in such a risk-off market. This disconnect between economic reality and the stock markets could be associated with the comments by the Fed’s Chairman Jerome Powell that the central bank hasn't run out of ammunition yet and could do more if required. However, he also said that the stock rally could decline significantly if there were some setbacks in the fight to contain the virus. Another reason of stocks’ fall could be the deterioration of the US-China relationship.

Moreover, the WTI oil price went above $30 a barrel! For the first time in two months! As producers continued to cut production, helping to rebalance a market. Together with a tentative recovery in demand, that’s made a repeat of last month’s plunge below zero extremely unlikely before the expiration of the WTI June contract on Tuesday. There’s still a risk, however, that oil’s recovery could be derailed if the pandemic worsens. However, prices are unlikely to drop below $20 a barrel.

Resistance is 35. Support levels are 23, 20 and 13.

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Market outlook on May 19


19.05.2020

How did Merkel push EUR up? What company will first make a vaccine? How long will oil rise? You’ll find all answers in the article!
Angela Merkel switched sides

Germany and France made a deal to fund $546 billion to support members of the European Union, that’ve been hit hardest amid the coronavirus. It was a surprise as only recently Germany made a decision that the EU's mass bond-buying violates the German constitution. It was a clear message that Germany doesn’t want to spend more money to support poor EU members. And now, Angela Merkel breaks the German taboo and lend money to the EU. Why? Is it the fight for the European idea? Anyway, everyone seems happy now except Austria, Netherlands and Denmark. As a result, EUR climbed on optimistic news.

Let’s look at some technical levels. If the price crosses the resistance line at 1.098, it can go even higher and reach 1.114. Otherwise, it goes down to the support line at 1.084, and after it may dip down to 1.0775.

Moderna Inc’s can save the world

The American biotech company Moderna revealed positive results on testing. The small group of volunteers managed to produce protective antibodies, what is definitely a good sign. Let’s wait for future tests and fingers crossed! Yesterday the stock jumped and almost reached $86. However, today it’s moving down.
Oil prices continue growing up

The vaccine optimism turned the market into the risk-on mode. The oil price formed a steady upward trend. It’s a result of a reduced supply and a boosted demand. The WTI price is headed to $35 a barrel. Support are at 23 and 20.

Stocks gain

An overall positive mood pushed the stocks indexes up. Just look at it! On Wall Street overnight, the S&P 500 gained 3.15%. The Dow Jones Industrial Average rose 3.85% and the Nasdaq Composite added 2.44%. Very promising!

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Will the Flash Manufacturing PMI support the EUR?


20.05.2020

Euro Area Flash Manufacturing PMI will be released on Friday at 11:00 MT time.

Instruments to trade: EUR/USD, EUR/AUD, EUR/GBP, EUR/JPY

Similar to the same indicator in the UK, the Eurozone Manufacturing PMI’s drop in April was the steepest since its inception in 1997. From 44.5 in March it plunged to 33.4 in the next month. May’s Manufacturing PMI should be in the same spectrum noting the complicated state the European economy is in. Some countries still are experiencing local peaks of infection rates, others are struggling to keep the risk of the second wave of the virus at bay while the gradual economic reopening takes place. Therefore, it would be reasonable to expect the May Flash Manufacturing PMI in Europe to be comparably weak as in April. However, if it happens to positively surprise the market, the EUR will grow in value.

If the figure is better-than-thought, the EUR will rise.
Otherwise, the EUR will fall.

Check the economic calendar

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Main market drivers on May 21


21.05.2020

Let’s start with the stock market. The US-China relationship got worse and set a risk-off market sentiment. The US Senate claimed that it could bar Chinese companies from listing on American exchanges. While President Donald Trump tweeted criticism of China’s handling of the coronavirus outbreak. Everybody took it really seriously. As you can see on the chart S&P 500 has a strong upward trend, but after the swing up yesterday, it hit a 100-day moving average and contracted today. Support levels are at 2815 and 2705. However, if it breaks through the retracement at 2975, it will go up to 3000 and then 3110.

Let’s move on to the oil. May has brought some relief to the oil market. The worst of the demand drop seems to be over. The WTI oil price ticked up to $34 a barrel, while Brent crude rose to $36. Governments are easing lockdowns, and that’s boosting consumption. At the same time, Saudi Arabia, Russia and other OPEC members have started unprecedented oil production cuts, easing the massive oversupply. We haven’t seen such high prices since March 10. If it breaks through the resistance at 35, it may go even further to 37. Support levels are at 27 and 23.

And finally let’s talk about gold. The gold trades at high rates these days. We hadn’t seen any growth yesterday. The price was spiking high, but closed negative. That’s why we could assume that the price will move down in the short term, but the long term remains bullish. It could have a pullback to 1715 or even 1685 and then jump again.

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What moves the market on May 25?


25.05.2020

Investors are confused. They weigh the prospect of a soon recovery as economies are reopening against the growing US-China tension. Also, analysts anticipate the whole trading to be discreet with US and British markets closed for public holidays.
Stocks gain

The risk-on mood still had a positive impact on stock indexes, such as S&P 500, Nasdaq and Dow Jones. S&P 500 has gained and approached the retracement level at 2975. If it crosses it, it will open doors toward the psychological mark at 3000. Support is at 2895.

Risk-on currencies are under pressure

Whereas, optimism around economic reopening is fading because of the lack of transparency in US-China relationships. Beijing decided to put security laws on Hong Kong, what was viewed negatively by the USA. Investors prefer safe-haven currencies to risk-on ones. AUD, NZD and GBP are moving down under pressure. Let’s look more closely at AUD/USD. It had been a strong upward trend since March 20. Nevertheless, the price has started falling on May 21. It’s may be just a correction. After the pullback to the support line at 0.649, it can move up again. Retracement is at 0.66. Support levels are at 0.649, 0.64 and 0.627.

USD vs JPY

The Japan’s government is expected to lift the state of emergency in Tokyo and its surrounding regions. The US dollar remains the most preferable currency among other safe-haven ones. It has even unbeaten the Japanese yen. USD/JPY has almost broken through the retracement level at 107.725. The next one is at 107.9. Support lines are at 107.35 and 107.1.

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Market news on May 26: S&P 500 passed 3000


26.05.2020

Let’s look at main movements on the market today on May 26.
S&P 500 surged

First of all, S&P 500 passed the 3000 mark! The market sentiment is really risk-on today. It’s mainly based on recovery dynamics and potential drug developments. S&P 500 is headed to the next retracement level at 3110. Support levels are at 2960 and 2815.

GBP is moving up

Nevertheless, tensions between Washington and Beijing remain in focus as the USA added 33 Chinese entities to a trade blacklist without warning. It’s better to keep an eye on future developments in their relationship.

But, US-China disputes fail to weigh on risks as Donald Trump hasn’t yet pronounced the last word on the Hong Kong issue. The UK Prime Minister Boris Johnson announced the opening of all non-essential shops from June 15. All this played well for the British pound. It has just crossed the retracement level at 1.2265. Now it’s heading to 1.2315. Support levels are 1.22 and 1.216. However, analysts have bearish scenarios for pound in the long-term. Reasons are the end-June deadline to extend the Brexit transition period and the possibility of negative interest rates in the UK.

Oil demand is recovering

Let’s move on to the oil market. The WTI price approaches the retracement level at 35. The head of the International Energy Agency forecasted that the oil market will recover even before the global pandemic. According to him, the oil demand will rebound to its pre-crisis level in the absence of strong government policies, a sustained economic recovery and low oil prices. If the price breaks through 35, it will go further to 37.5. Support levels are 27 and 23.

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Trade ideas on May 29


29.05.2020

Let’s look at main movements on the market.
USD/JPY fell down

Investors are waiting for Donald Trump’s response to China’s security law in Hong Kong. As a result, the market uncertainty pushed up the Japanese yen. The USD/JPY is headed down to the support line at 107.1. If the price manages to cross it, it will pave the way towards the next support level at 106.8. Resistance levels are at 107.45 and 107.725.

Stocks dipped on risk-off sentiment

S&P 500, Dow Jones, Nasdaq dipped today. Today the focus of investors has shifted from optimistic prospect of reopening economies to the US-China tensions. China’s parliament on Thursday insisted on the new security legislation in Hong Kong that raised a lot of questions about its future freedom and economic functioning. Everybody’s waiting for the US reaction today. Inevitably, the US-China relationship will get worse. Just yesterday S&P 500 passed the 3060 mark, unseen since March. Support levels are at 3000 and 2960.

Gold is moving up

The gold price rose on the market uncertainty and falling USD. It’s headed up to the retracement level at 1730. If it breaks through it, it will possibly jump up to 1750. Support levels are 1700 and 1680. Most analysts have bullish forecasts for gold as it always sticks to the long-term trend.

AUD/USD surged on weak USD

The Australian dollar went up as the US dollar fell. AUD has been climbing since March 20. Today it has met with a 200-day moving average at 0.6665. If it breaks through it, it will go up to the next resistance level at 0.675. Support lines are 0.66 and 0.65.
 

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How US protests affect market?


01.06.2020

The main source of volatility for global markets is US-China tensions. Investors were waiting for US President’s speech on Friday for some hints. But, Donald Trump was not so disruptive as everybody expected. He didn’t impose any direct sanctions on China for its treatment of Hong Kong. According to investors, the US impact on China and Hong Kong is likely to be limited and more symbolic while the financial sector is unlikely to be affected.
Stocks gained

That improved the market sentiment and pushed stocks up. Let’s look at S&P 500. It has been climbing since March 20. It has already passed the 3040 mark. If it breaks through the retracement level at 3070, it will make the way towards 3110. Support levels are 3000 and 2935.

EUR surged

Nevertheless, violent protests in some American cities bothered investors, as crowds increase chances for the second coronavirus wave and economic activity loss.

As a result, EUR/USD rose on the weak greenback. Moreover, investors highly expect the ECB to unveil the rescue program with an additional 500 billion euros of asset purchases. All that played well for the EUR.

The price reached the March high at 1.114. The next retracement is at 1.117. If it manages to break through it, it may go even higher to 1.121. Support levels are at 1.11 and 1.10.

Gold moved up

The gold has passed 1740 and it’s moving up to a recent high at 1750. The overall trend is bullish, as you can see. And, the gold is likely to stick to the trend. Support levels are 1730 and 1700.

Oil forecast

Let’s talk about oil a little bit. Crude surged a record 88% in May driven by the OPEC+ deal. What’s more, OPEC+ is likely to expand its supply cuts in next months. However, prices are still well below where they have been at the beginning of the year. That’s because the demand yet need to show a sustained improvement for oil to keep rallying. Thanks to China, its oil demand has risen to near pre-coronavirus levels. However, the US demand stays low because of violent protests in the USA. Lrt's look at WTI oil chart. If the price crosses the 100-day moving average, it may go further to 37.5. Support are 31.5 and 27.

To trade WTI with FBS you need to choose WTI-20N.

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What to trade on June 2?


02.06.2020

AUD surged

The day started with a fresh data from Australia. The Reserve Bank of Australia set a cash rate unchanged. Also, RBA’s governor Philip Lowe was quite optimistic about the future economic recovery. He said: “it is possible that the depth of the downturn will be less than earlier expected”. He noticed that restrictions had been eased and rate of infections reduced. The market sentiment immediately improved and pushed AUD up. We can see on the AUD/USD that it rebounded to its pre-crisis levels. The price broke through all moving averages. Now it’s headed towards the retracement level at 0.69. The next one will be at 0.7. Support levels are 0.675 and 0.665.

Oil prices stabilized at $35

The oil prices are flat as markets wait for the OPEC+ decision. Russia and Saudi Arabia can agree to extend supply cuts in next three months. It will allow WTI oil prices to rebound to $40 a barrel at least. Petrol consumption is recovering, but it still well below pre-coronavirus levels. Speaking about airplanes, it’s hard to say when the industry will come back to normal. The WTI oil price slightly crossed the 100-day moving average and it’s headed to the new high at 37.5. Support levels are 31.5 and 27.

Violent protests in the USA

Violent protests in the USA have made the US dollar really weak. Investors start doubting about the future US recovery. The US economy hasn’t yet recovered from the coronavirus damage, when it met the new challenge. Donald Trump said that he would deploy the military troops if states don’t take measures. That led to S&P 500 contraction for a while. However, stocks are still trading at high levels as most economies are reopening.
Tesla jumped

On Saturday, SpaceX, founded and led by Elon Musk, sent two NASA astronauts to the International Space Station. The launch was successful and gave more confidence to investors in Musk and in Tesla. Let’s look at the chart, the price reached pre-crisis positions. The key psychological mark at 900 is really close. Support levels are 805 and 765.

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