The oil is moving up, right into the trap
Brent quotes continue to rise, reaching $36.91 in the morning, which is close to the peak of April at $37.05.
Brent received an additional growth impulse on the US stockpiles data, released on Wednesday. Last week it declined by 5 million barrels, which was the second week of decline in volumes. At the same time, the American strategic reserves continue to replenish, having increased by 1.9M barrels.
It turns out that the balance in the US is slightly above 9.2M barrels per day. However, we are witnessing that even at 11.6-11.5 oil reserves are decreasing. This leads to the idea that the commodity customers are indeed significantly increasing their oil purchases near the cyclical lows. However, this is also bad news for oil prospects. The overhang from reserves will hurdle price recovery and suppress demand for raw materials in the coming months, as countries reduce their stockpiles to average levels.
Brent quotes continue to rise, reaching $36.91 in the morning, which is close to the peak of April at $37.05.
Brent received an additional growth impulse on the US stockpiles data, released on Wednesday. Last week it declined by 5 million barrels, which was the second week of decline in volumes. At the same time, the American strategic reserves continue to replenish, having increased by 1.9M barrels.
It turns out that the balance in the US is slightly above 9.2M barrels per day. However, we are witnessing that even at 11.6-11.5 oil reserves are decreasing. This leads to the idea that the commodity customers are indeed significantly increasing their oil purchases near the cyclical lows. However, this is also bad news for oil prospects. The overhang from reserves will hurdle price recovery and suppress demand for raw materials in the coming months, as countries reduce their stockpiles to average levels.
The US number of continued claims increased sharply
Last week, 2.438 million Americans applied for unemployment benefits for the first time, which is in line with expectations and is at least nine weeks in advance. However, the number of repeated requests showed a sharp jump of 2.525 million to over 25M. For comparison, a week earlier, this increase was only 171K. The continuing sharp increase in the number of unemployed makes us look with caution in the future.
Despite the first steps of quarantine easing, US companies continue to reduce staff, and finding a new job is not so easy these days. The proportion of people who receive benefits in the United States is 17.2% in contrast with 1.2% a year earlier, which was three times lower than the official unemployment rate (3.6%).
Last week, 2.438 million Americans applied for unemployment benefits for the first time, which is in line with expectations and is at least nine weeks in advance. However, the number of repeated requests showed a sharp jump of 2.525 million to over 25M. For comparison, a week earlier, this increase was only 171K. The continuing sharp increase in the number of unemployed makes us look with caution in the future.
Despite the first steps of quarantine easing, US companies continue to reduce staff, and finding a new job is not so easy these days. The proportion of people who receive benefits in the United States is 17.2% in contrast with 1.2% a year earlier, which was three times lower than the official unemployment rate (3.6%).
Ethereum is more stable than Bitcoin
Bitcoin again failed to pass the $10K threshold, and after a few days in a sideways trend, the first coin is facing increased bear pressure.
While all the news was around halving and the likely prospects for Bitcoin after this event, the leading altcoin Ethereum (ETH) demonstrated quiet growth. Since the beginning of the year, Ethereum has grown by 61%, compared to 31% for Bitcoin in the same period. ETH usually follows the increase in Bitcoin, but in the end, it turns out that the coin adds more and loses less.
Bitcoin again failed to pass the $10K threshold, and after a few days in a sideways trend, the first coin is facing increased bear pressure.
While all the news was around halving and the likely prospects for Bitcoin after this event, the leading altcoin Ethereum (ETH) demonstrated quiet growth. Since the beginning of the year, Ethereum has grown by 61%, compared to 31% for Bitcoin in the same period. ETH usually follows the increase in Bitcoin, but in the end, it turns out that the coin adds more and loses less.
Over the last day, 107.1K new cases of COVID-19 were detected worldwide (new high) vs 100.5K and 99.4K a day and a week ago. The number of recovered over the day was 58.1K (64.5 earlier). The total number of cases is 5.20M, of which 2.78M is active, 2.08M recovered, and 334.7K died. The US has added 28.2K new cases to 1.62M total. Next by the number of new cases are Brazil (17.6K), Russia (8.8K), and India (6.2K). Until now, are closed less half of all detected cases (47%). It is positive that mortality decreases over time - health systems are more prepared. But even in this case, the total number of deaths will probably double by the end of the pandemic.
The China-U.S. dispute is pulling markets down again
China and the U.S. toughened bilateral rhetoric until it began to have a visible impact on markets. On Friday, Hong Kong’s Hang Seng index was down 3.7% after falling 3% a day earlier. Beijing move towards more control over the former British colony. Trump said he would respond “very strongly” to these legislative initiatives.
Recall that it was the combination of economic decline and rising protectionism that led to the Great Depression of the 1930s. At the same time, the Spanish flu (1918-1919) became a prologue to the “Roaring Twenties”. After all, after the First World War and the deadly disease that took the lives of 50-100 million people, but after this, the world became more global. Nowadays, protectionism is increasing in world politics that undermines the potential for recovery. Further intensifying of geopolitical tension can return markets to a steady decline.
China and the U.S. toughened bilateral rhetoric until it began to have a visible impact on markets. On Friday, Hong Kong’s Hang Seng index was down 3.7% after falling 3% a day earlier. Beijing move towards more control over the former British colony. Trump said he would respond “very strongly” to these legislative initiatives.
Recall that it was the combination of economic decline and rising protectionism that led to the Great Depression of the 1930s. At the same time, the Spanish flu (1918-1919) became a prologue to the “Roaring Twenties”. After all, after the First World War and the deadly disease that took the lives of 50-100 million people, but after this, the world became more global. Nowadays, protectionism is increasing in world politics that undermines the potential for recovery. Further intensifying of geopolitical tension can return markets to a steady decline.
The British pound is falling for the third day in a row to 1.2160 earlier today, receiving a new impulse of pressure after the release of alarming statistics. Retail sales fell 18.1% in April (by 15.2% ex-fuel), slightly weaker than expected. It is unnecessary to say that it was the record collapse in the history of the indicator. The retail sales index fell to 2005 levels.
Also, ONS reported an increase in the budget deficit significantly higher than forecasted amid a 26% revenue drop and a 54% surge in spending. As a result, net public debt reached 97.7% of GDP and, 113.4% including debt of public sector banks, reached its highest level over the past six years.
Also, ONS reported an increase in the budget deficit significantly higher than forecasted amid a 26% revenue drop and a 54% surge in spending. As a result, net public debt reached 97.7% of GDP and, 113.4% including debt of public sector banks, reached its highest level over the past six years.
Right now, borrowing is not a problem for the UK Treasury as government bond yields have fallen to record lows. Earlier this week, the Treasury first borrowed from markets at a negative rate. However, in the longer term, the combination of low inflation, a weak economy and a high debt burden reduce the potential for GDP growth. Reinhart and Rogoff in the book “This time is different” noted that the growth rate of the economy is sharply slowing at a public debt close to 100% of GDP. A recent example of Europe and Britain showed why: at the earliest opportunity, the government switches from stimulating growth to fiscal discipline.
Over the last day, 96.5K new cases of COVID-19 were detected worldwide vs 99.9K and 107.5K over the previous two days and 82.3K a week ago. The number of recovered was 54.5K (58.1K and a record 105.6K earlier). The total number of cases is 5.50M, of which 2.85M is active, 2.30M recovered, and 346.K died. The five countries with the highest daily growth are the US (19.6K), Brazil (16.2K), Russia (8.6K), India (7.1K), Peru (4.2K). The daily number of recovering grows much faster than the number of new infections, despite the worsening picture in Brazil and India. The downward trend in daily deaths continues.
Memorial Day: trading time schedule changes
On Monday, May 25, the following instruments will not be available for trading:
- CFDs on US Shares and UK Shares
- CFDs on Indices Futures
- CFDs on Spot Indices
- CFDs on Agricultural Commodities Futures
Please see the details in the FxPro Market Holidays calendar: https://www.fxpro.com/trading-tools/market-holidays
If you have any questions, feel free to contact our Customer support team via email support@fxpro.com.
On Monday, May 25, the following instruments will not be available for trading:
- CFDs on US Shares and UK Shares
- CFDs on Indices Futures
- CFDs on Spot Indices
- CFDs on Agricultural Commodities Futures
Please see the details in the FxPro Market Holidays calendar: https://www.fxpro.com/trading-tools/market-holidays
If you have any questions, feel free to contact our Customer support team via email support@fxpro.com.
Weaker yuan is a clue from China to the US
Today Beijing has lowered the official yuan rate to its lowest since February 2008.
The offshore exchange rate, USDCNH, reflects the height of disputes between the two major economies. At the same time, the official rate can be considered a very reliable indicator of the mood of Chinese politicians.
Offshore yuan rose to 7.15 – this is the area of peaks, where USDCNH grew amid aggravation of relations between China and the United States last year. That is, market pressure on the exchange rate was not as intense as before.
This is a clear clue from Chinese bureaucrats that they intend to use the cheaper renminbi rate as a measure to support China’s export competitiveness. The lower exchange rate has always been a reason for anger from the US, and it promises to be the same this time.
Today Beijing has lowered the official yuan rate to its lowest since February 2008.
The offshore exchange rate, USDCNH, reflects the height of disputes between the two major economies. At the same time, the official rate can be considered a very reliable indicator of the mood of Chinese politicians.
Offshore yuan rose to 7.15 – this is the area of peaks, where USDCNH grew amid aggravation of relations between China and the United States last year. That is, market pressure on the exchange rate was not as intense as before.
This is a clear clue from Chinese bureaucrats that they intend to use the cheaper renminbi rate as a measure to support China’s export competitiveness. The lower exchange rate has always been a reason for anger from the US, and it promises to be the same this time.
Bitcoin retreats in the background of market and governments pressure
Bitcoin lost 5% or $440 in 24 hours, and at the beginning of the new working week is changing hands for $8,800. Formally, we are witnessing evidence of a continued long-term downward trend, which goes through highs of 2017, 2019, and early 2020. If the 200-day moving average of $8,400-$8,500 will be unable to resist pressure, there is a risk of falling towards $7,500 (50-day average) and even $7,000: levels that act as an essential psychological and technical benchmark. But is it so bad for the crypto market to have a sharp and “bloody” sell-off after encountering a hard resistance of around $10,000?
Bitcoin lost 5% or $440 in 24 hours, and at the beginning of the new working week is changing hands for $8,800. Formally, we are witnessing evidence of a continued long-term downward trend, which goes through highs of 2017, 2019, and early 2020. If the 200-day moving average of $8,400-$8,500 will be unable to resist pressure, there is a risk of falling towards $7,500 (50-day average) and even $7,000: levels that act as an essential psychological and technical benchmark. But is it so bad for the crypto market to have a sharp and “bloody” sell-off after encountering a hard resistance of around $10,000?
Ifo's German business climate index exceeded expectations in May, which helped the euro trade Monday. The indicator of business conditions increased from 74.2 to 79.5 (78.3 expected). The growth was due to an increase in the expectations component from 69.4 to 80.1. As the markets try to look forward, their attention is entirely focused on the "glimmer of hope" regarding business prospects in connection with the easing restrictions.
In the previous recession, this indicator reached its bottom in December 2008, had begun to add long before the contours of economic collapse became apparent in the German economy in 2009. It is also essential to understand that Ifo reversal rarely reverses the euro against the dollar.
Instead, we can talk about the reverse relationship: the weaker euro exchange rate encourages the optimism of export-oriented Germany. Thus, it isn't easy to rely on current data as a signal of further strengthening of the single currency.
In the previous recession, this indicator reached its bottom in December 2008, had begun to add long before the contours of economic collapse became apparent in the German economy in 2009. It is also essential to understand that Ifo reversal rarely reverses the euro against the dollar.
Instead, we can talk about the reverse relationship: the weaker euro exchange rate encourages the optimism of export-oriented Germany. Thus, it isn't easy to rely on current data as a signal of further strengthening of the single currency.
Which instrument do you see as the most interesting to trade this week?
Final Results
39%
EURUSD
39%
Gold
10%
Crude Oil
13%
Stocks and Indices
Over the last day, 90.2K new cases of COVID-19 were detected worldwide vs 96.5K day ago and 88.6K this day a week ago. The number of recovered was 63.8K (54.2K earlier). The total number of cases is 5.59M, of which 2.88M is active, 2.37M recovered, and 347.9 died. The five countries with the highest daily growth are the US (19.8K), Brazil (13.1K), Russia (8.9K), India (6.4K), Chile (4.9K). Spain revised its data, taking away 1915 deaths and about 400 cases of infection, which embellished the general statistics for the day.
Double test for the bulls on S&P500
Futures on the S&P500 (SPX) exceeded 3000 this morning. In 2019, the index managed to take this round mark not from the first attempt, making it a critical resistance.
The importance of this level is now further enhanced by the fact that the 200-day average passes near it. This level is a significant trend indicator for large investment banks. Unofficially, this level separates the downtrend from the uptrend. Many traders refrain from buying the asset that trades below the 200-DMA, and moves above this line serves as buying signal.
Thus, the closing of the trading session today above 3000 for S&P500 may serve as a strong signal for a further rally of the American market and spur growth in the world markets.
However, despite the importance of this moment for the psychology of market participants, one should be very careful.
Futures on the S&P500 (SPX) exceeded 3000 this morning. In 2019, the index managed to take this round mark not from the first attempt, making it a critical resistance.
The importance of this level is now further enhanced by the fact that the 200-day average passes near it. This level is a significant trend indicator for large investment banks. Unofficially, this level separates the downtrend from the uptrend. Many traders refrain from buying the asset that trades below the 200-DMA, and moves above this line serves as buying signal.
Thus, the closing of the trading session today above 3000 for S&P500 may serve as a strong signal for a further rally of the American market and spur growth in the world markets.
However, despite the importance of this moment for the psychology of market participants, one should be very careful.
Over the last day, 92.1K new cases of COVID-19 were detected worldwide vs 90.2K day ago and 94.8K this day a week ago. The number of recovered was 65.1K (63.8K earlier). The total number of cases is 5.69M, of which 2.9M is active, 2.43M recovered, and 352.2 died. The five countries with the highest daily growth are the US (19.0K), Brazil (15.7K), Russia (8.9K), India (5.8K), Peru (5.8K). Last Friday, reported a sharp jump in serious and critical cases (+9.1K), but since then, this figure has slightly decreased from 53.6 to 53.1K.
S&P500 fails to cross Rubicon on its first attempt
The S&P500 index exceeded 3000, while the Dow Jones index rose above 25000 on Tuesday during the day. As the close of the trading approached, both indices failed to stay above these psychological levels. The S&P500 found itself under increased pressure in the last trading hours of Tuesday.
It is worth paying more attention to investors’ activity as the closing of trades approaches. Hence, we take it as a signal that the “sell on growth” approach is still in place. Close the day below the 200-DMA is a signal that participants were not ready to switch to buying just two months after the huge collapse.
The S&P500 index exceeded 3000, while the Dow Jones index rose above 25000 on Tuesday during the day. As the close of the trading approached, both indices failed to stay above these psychological levels. The S&P500 found itself under increased pressure in the last trading hours of Tuesday.
It is worth paying more attention to investors’ activity as the closing of trades approaches. Hence, we take it as a signal that the “sell on growth” approach is still in place. Close the day below the 200-DMA is a signal that participants were not ready to switch to buying just two months after the huge collapse.
EURUSD turned to growth and approached 1.1000, near which the 200-day average passes. On the news about the upcoming 750B euro stimulus package, EURUSD has jumped above this limes. Both are psychologically important. Their breakdown often leads to a significant increase in purchases. Also, for the euro, this may be a signal for the end of the downtrend since 2018.
Before one jumped into the market, it is prudent to wait for the end of this epochal battle of bulls and bears. It should be borne in mind that the pair "likes" to make false breakdowns of the 200-day average, but then returns to the prevailing trend. It is more careful to give time until the end of the month.
We are now witnessing a similar battle for the 200-day average and psychologically important round level of 3000 at S&P500. It may well turn out that both essential instruments for world markets synchronously successfully overcome them or fail. And this will be the strongest signal, perhaps for several months or even quarters ahead. It is better not to rush, and wait for confirmation with closing the week and month below or above 200-day averages and marks of 1.1000 and 3000 for EURUSD and S&P500, respectively.
Before one jumped into the market, it is prudent to wait for the end of this epochal battle of bulls and bears. It should be borne in mind that the pair "likes" to make false breakdowns of the 200-day average, but then returns to the prevailing trend. It is more careful to give time until the end of the month.
We are now witnessing a similar battle for the 200-day average and psychologically important round level of 3000 at S&P500. It may well turn out that both essential instruments for world markets synchronously successfully overcome them or fail. And this will be the strongest signal, perhaps for several months or even quarters ahead. It is better not to rush, and wait for confirmation with closing the week and month below or above 200-day averages and marks of 1.1000 and 3000 for EURUSD and S&P500, respectively.