PMI data to be the next catalyst

Oil => The commodity slips below $110
S&P500 => The index falls from a 5-day high
EUR/GBP => The pair falls below 0.85

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Oil edges lower of API data

Oil prices settled flat yesterday as concerns over slowing global growth hurting the demand outlook were offset by the optimism of a strong US driving season and Shanghai’s plans to reopen after a two-month lockdown.

Concerns over the global economy topped the worries of those at the Davos economic summit, with several speakers highlighting the risks of a global recession. Today oil prices are falling as global recession fears dominate. In Beijing, COVID cases are rising rapidly, sparking fears of further lockdowns.
However, the downside was being limited by expectations that the EU could approve the Russian oil embargo within days. Oil will look ahead to API stockpile data due later today. 

Where next for oil prices?

WTI oil trades above its multi-month rising trendline, above its 50 & 100 sma.

The RSI is in bullish territory, keeping buyers optimistic about further upside. Buyers will need to rise above 111.60, yesterday’s high, to attack 114.00, which opens the door to 116.30.

On the flip side, the 50 sma offered strong support earlier in May. Sellers would need to close below the 50 SMA at 104.30 to create a lower and for sellers to gain traction towards 100.00, the psychological level.

S&P looks to PMI data

US stocks rallied 1.8% yesterday after steep losses last week, which pushed the S&P to the brink of a bear market.

Risk sentiment improved after President Biden suggested that his administration was considering reducing tariffs on China and comments from JP Morgan CEO Jamie Dimon, who expressed some confidence in the economic outlook. Over the past two months, rallies have quickly been sold off owing to a lack of confidence in the view.

Today the pair is falling as attention turns to PMI data, which is expected to show resilience given the challenging backdrop. A speech by Fed chair Powell will also be closely eyed.

UK services PMI May

Expected: 55.2 (0.6)

Previous: 55.6

Euro steadies after Lagarde inspired boost

EUR/GBP leaped higher in the previous session after ECB President Christine Lagarde as good as confirmed speculation that the ECB will raise interest rates sooner rather than later.

Lagarde said that the ECB should be able to end negative interest rates by the end of the third quarter. It is unusual for the central bank president to use such clear language. The ECB has been much slower than other central banks in hiking rates. Meanwhile, the pound drifted lower yesterday despite the BoE chief Andrew Bailey saying that the central bank was prepared to raise interest rates again to tame inflation.

Today the pair is holding steady ahead of PMI data from the UK and the eurozone. Both are expected to show that business activity slowed slightly in May but remained resilient given the backdrop of surging prices.

EZ Composite PMI UK services PMI

Expected: 55.3 (0.5) Expected: 57.3 (1.6)

Previous: 55.8 Previous: 58.9

 

Support can be found at 0.8430 (yesterday’s low) and 0.84 (50 sma).

Resistance for the pair can be seen at 0.85 (weekly high) and 0.8550 (December 20 high).