United States Biden’s $6 trillion budget proposal

In the past week the markets focus shifted to President Biden’s $6 trillion budget proposal. The Biden administration is following up on the plans that they had initially to support the economy extensively. The resources will be allocated to sectors like military, infrastructure, education, scientific research and renewable energy. These sectors are to see increases in the budgets spent so far and the plans tend to stretch-out in the following years with the funds being allocated gradually. Very importantly however the Biden administration has plans to support wealth equality by introducing a new tax code that will focus more on the rich. Of course plans to support environmental protection are also included bringing lower greenhouse gas emissions which could support the green energy sector and could subsequently hurt other sectors or force them to change. Furthermore, the rather large fiscal package will be used to strengthen the US position globally in terms of technology to be able to compete with China which is also on the rise. From an economic perspective some of the US data that stood out for the month of May were the Manufacturing and Services PMI readings which improved drastically with special focus on the later making significant progress. Finally, the Preliminary Core PCE Prices which is a notable measure of inflation increased for Q1 preparing the US economy for a new post pandemic era program. Inflation is constantly in the markets focus with the FED being involved and possibly taking action to gauge inflationary pressures from getting out of proportion. At the moment the greenback seems to stabilize at yearly low levels pushing other major currencies higher.

Europe seeing light at the end of the tunnel

Europe is also finally seeing light at the end of the tunnel as daily confirmed new cases in the block dropped by about two thirds between April 14 and May 19, according to the Wall Street Journal’s World in Data. Even though the block’s delay on vaccine deployment could affect its economic performance in the short to medium term, so far the figures confirm the situation maybe stable. Eurozone’s Preliminary Consumer Confidence for May improved along with its services, economic and industrial sentiment figures. Moreover Germany’s Ifo Business Climate New, Current Conditions and New Expectations improved along with its ZEW Indicators for May but on the contrary its Manufacturing PMI which is rather important dropped. Due to the fact that overall the readings are positive for the block the forecast for the Eurozone economy to return to its pre-pandemic size towards the end of the current year is seemingly in reach. This could be considered a victory as the initial expectations were for the block to move into 2022 before rebounding. The EUR has been strong against the USD in April and in May gaining most of the ground lost in the first three months of the current year.

United Kingdom reopening the economy on 21 June

Britain’s pandemic recovery was also evident as the economy continues to enjoy improved economic performance. Some analysts believe that the combination of the vaccination and the improved economic data is evidence that mark a turning point in terms of business and other important parts of the economy. However despite the positive outlook for the economy UK officials like Prime Minister Boris Johnson and Health Secretary Matt Hancock had doubts over fully reopening the economy on 21 June as the Indian coronavirus variant still represents a great danger to the nation as its rapidly spreading. On May 17 some lockdown measures were relaxed with people allowed to meet indoors for the first time in months while going to pubs and restaurants was also allowed. This had led to a minor increase in new covid-19 cases in various areas in the UK which creates some concern. Even though results on research of the effect of the Indian Variant on the nation will be released in the following weeks, some media sources state that more lockdown measures may be required with a late surge in cases within the UK. From a pure economic perspective Preliminary UK Manufacturing and Services PMI’s improved in May while it’s yearly GDP rate also improved. Finally the GBP seems to remain steady at multiyear high levels against the USD even attempting to breach them to the upside in the past weeks.

China The raw material worries

Even though China has had a head start in the current year being able to control the pandemic within its boundaries some believe the Mainland’s economic performance is flattening at the moment. The most recent NBS Manufacturing PMI for May came in lower than expected enacting a notable reaction by market participants. At the moment various important media sources are making the case that China is currently affected by increasing raw material prices. Moreover, industrial metals like copper prices increased to the point that manufacturers could not raise their selling prices, intensifying worries that a surge in commodity prices could be reducing profits. It is not clear whether this situation will persist or not as in the previous week the Chinese had warned the market to keep raw material prices lower and indeed some of these prices had dropped. Thus we could not underestimate China’s purchasing power and its influence and impact on global prices. The AUD which greatly associates with China as the two countries exchange goods, seems to remain stable against the USD moving with the same range since the start of the year.

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

Disclaimer:

This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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We make a start with the releases made in the past two weeks and its characteristic that active oil rigs in the US continued to increase, with their number increasing to 324 as per the Baker Hughes US oil rig count. At the same period a buildup of oil inventories in the US was underway yet at a diminishing rate according to the EIA crude oil inventories figure which even indicated a drawdown of 876 thousand barrels in the last week, while the API crude oil inventories figures shows a widening of the built up reaching 3.91 million barrels in the last week. Despite the mixed signals provided by the last two indicators, we tend see demand being on the rise given that the number of active oil rigs is rising, yet the surpassing of demand levels by production as reported by API, should not be underestimated. Overall a tightening of the US oil market could create some support for oil prices in the coming weeks.

On the other hand, the OPEC group has reportedly lowered the demand outlook forecast for the current year, by around three hundred thousand barrels per day. The decision to lower the outlook seems to be based on worries for the market’s recovery, given that renewed lockdown measures are employed which enhanced the organization’s cautiousness. The overall effect seemed to be inclined on the bearish side yet of low impact. It should be noted that the organization had decided to keep its production cuts unchanged in a recent meeting. Reports though state that OPEC oil output has risen in March, led by Iran and countering the oil production cuts of other members. Overall though additional production cuts by the Saudi’s still lowered the levels of output by the group. Analysts tend to expect that the group could roll over the production cuts into May, with Saudi Arabia keeping in place its additional voluntary cuts until June.

In the past days a report by the IEA wrote that Oil demand will return to 2019 levels by 2023. Despite this prediction, we must note that during the beginning of the current year, global oil demand was higher than expected due to colder weather and improved industrial activity in the US and elsewhere. In our view, as the economic recovery and vaccination processes continues to be rolled out, the demand for Oil could increase with more people being able to return to work or travel.

On the other hand, the global economy seems to be recovering and, in some regions, even faster than expected. Its characteristic that China’s manufacturing PMI for March outperformed market expectations. Given also that China has set a goal of economic growth at 6%, while some analysts cite it closer to 8% and is a large oil user, demand may get an additional boost. At the same time the US economy also tends to recover at a faster than expected pace, which may also imply a higher demand for the oil market. It’s characteristic that EIA in its weekly petroleum status report stated that demand increased by 9% on a week by week basis and overall the US demand averaged 20.3 million b/d last week, up from the 2021 weekly average of 19.4 million b/d. Overall, demand seems to be picking up for the oil market and could create some bullish tendencies fundamentally for black gold’s prices yet that has still to be confirmed in the coming weeks.

Phân tích kỹ thuật

WTI 4H chart

Support: 59.00 (S1), 57.20 (S2), 55.10 (S3)

Resistance: 61.15 (R1), 63.00 (R2), 65.40 (R3)

WTI maintained a sideways movement since our last report on the 18th of March, with the main body of the price action being between the 61.15 (R1) resistance line and the 59.00 (S1) support line, despite some outbreaks to the downside. We tend to maintain a bias for a sideways motion and for it to change we would require a clear breaking of either of the prementioned boundaries. It’s characteristic that the RSI indicator below our 4-hour chart continues to run along the reading of 50, with slight divergences to either side, implying a rather indecisive market. Should the bulls take over, we may see WTI prices, breaking the upper boundary of the prior sideways movement, which is the 61.15 (R1) resistance line and aim for the 63.00 (R2) level which capped the commodity’s prices on the 25th of February. Even higher we note the 65.40 (R3) resistance hurdle. Should the bears take over, we may see WTI’s price-action breaking the 59.00 (S1) support line and aim for the 57.20 (S2) support level, which marks the lowest point oil prices have reached in the past two weeks, specifically on the 24th of March. In an intense selling interest, we may see oil prices heading for the 55.10 (S3) support barrier

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

Disclaimer:

This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

The post Oil market: WTI’s price stabilises for now appeared first on Complete Turnkey Introducing Brokers (IB) Solution at IronFX.