After their decent run last week, US and European futures are trading cautiously higher today. This is an important week in terms of the economic data released from the US. Traders are also keeping a close eye on the rising oil prices. This makes the soaring inflation situation even more complicated as central banks are trying their best to lower inflation.
Chinese economic data released overnight is also in focus; the data was better than the forecast but still in contraction territory.
Oil prices are trading higher as the EU has agreed to punish Russia for its action in Ukraine. The EU has placed an embargo on Russia, and this decision by the EU was long coming. The embargo will take effect by the end of 2022. According to the European Commission President Ursula, the agreement will help the European countries to reduce their dependence on Russian oil by 90%.
Traders will be paying close attention to the oil and supply equation in the Eurozone. Oil prices in the EU will likely shift upward permanently as the EU will incur a higher cost of sourcing oil from alternative sources.
Regarding the technical price level, Brent and crude oil prices are looking strong as they continue to trade above the 50, 100 and 200-day SMA on the daily time frame, which confirms that bulls are in control of t the price. The next resistance for the Brent oil price is 125, while the support is 109.
China is an essential country as its economic data is closely watched by investors around the globe. The official Chinese manufacturing Purchasing Managers’ Index for May came in at 49.6, up from 47.4 in April.
The May figure was higher than the 48.6 level predicted by a Reuters poll but fell short of the 50-point threshold that distinguishes expansion from contraction. PMI measurements are continuous and reflect month-to-month growth or decline.
The main factor that matters the most in China is ultra-tight covid policies. The country wastes no time announcing a lockdown due to its zero tolerance of Covid policies. Over the weekend, major Chinese cities Beijing and Shanghai began to lift Covid bans as the local case count decreased.
On the mainland, the number of new patients with symptoms dropped to 20 on Sunday, down from 54 the day before. Beijing, the capital city, reported eight new Covid incidents on Sunday, while Shanghai logged six.
The relaxation comes approximately two months after Shanghai, China’s largest metropolis, ordered residents to stay in their residences for widespread viral testing. Beijing began strengthening Covid regulations around a month ago, but only in a few neighbourhoods.
Gold prices continue to consolidate while bulls try to push the price higher as the dollar index losses steam. The primary catalyst for the gold price is the US ISM Manufacturing PMI number which will be released tomorrow. If we see a number showing more strength, we could see the dollar index moving higher on the back of this reading, which will be negative for the gold price. However, if the data continues to show weakness, the dollar index could weaken further, which means that we could see the gold price moving higher. Of course, the most significant catalyst for the gold price remains the US NFP number coming out on Friday.
Bitcoin and Ethereum prices see a relief rally, and the price action shows some optimism among traders. However, one thing is pretty clear there is still no herd mentality among them. No one wants to back bitcoin and other cryptos blind fully. The blow-up in Luna has made investors more cautious, and it will take them time to overcome this challenge.
Crypt funds have moved $60 million of ETH to exchanges in terms of money and crypto follow. Traders fear that we could see another wave of sell-off for ETH, and any equivalent action in ETH could easily trigger a similar trend for the bitcoin price. It is important to note that Ethereum is still suffering from the scalability and price per transaction issue.