Stocks rally on rising oil prices and reopening of economies
Crude oil price rallied today as the market reacted to positive news from the industry. On Friday, data from Baker Hughes showed that American producers slashed oil rigs to their lowest level since 2010. The rigs stand at 258, down from the January high of more than 670. The market also reacted to the news on demand. According to Bloomberg, the demand for oil in China has jumped to the highest level before the coronavirus pandemic. Similarly, the fears of oversupply and the filling of storage tanks have started to subside. Still, the challenge for the oil market is that higher prices could lead to some of the closed wells restarting, which will lower prices.
The British pound declined today as market participants reacted to talks on negative rates and Brexit negotiations. In a statement yesterday, Andrew Haldane, the Chief Economist at the BOE said that the bank was examining negative interest rates. He also said that the bank was examining other options like expanding the quantitative easing in response to the current weakening of the economy. The economy could contract further due to coronavirus and the impasse brought about by Brexit. Last week, the third round of talks ended without a deal as the two sides clashed.
Global stocks rallied today as the market focused on the reopening of the economy. In Europe, the DAX index rose by more than 2% while the FTSE 100 and Stoxx 50 rose by more than 2% and 2.30% respectively. In Asia, the Nikkei rose by 0.50% even as Softbank announced a $17 billion loss. In Australia, the ASX rose by more than 2% while in Hong Kong, the Hang Seng rose by more than 60 basis points. Other than the reopening of economies, the market was positive about the higher commodity prices.
The EUR/USD pair rose slightly to an intraday high of 1.0815. On the four-hour chart, the price is along the 25-day and 50-day exponential moving averages while the price is slightly below the 23.6% Fibonacci Retracement level. The Average True Range (ATR) has declined, which is a signal of low volatility. Therefore, at this point, the pair may breakout in either direction as the market waits for important PMI and inflation data from the eurozone and the US.
The XAU/USD pair soared today as the market reacted to a dovish statement from the Fed chair. The price rose to a high of 1,763, which is the highest level since 2012. On the daily chart, the price moved above the bullish pennant pattern that was forming in the past two weeks. The price is now above the 25-day and 50-day exponential moving average while the RSI is slightly below the overbought level. Therefore, the pair may continue rallying as investors move to gold, which is a well-known safe haven.
The DAX index rose to an intraday high of 10,784 as the market started to price-in the impacts of reopening. On the four-hour chart, the price is slightly above the 100-day and 50-day exponential moving averages. It is also slightly below the 50% Fibonacci Retracement level while the RSI has been soaring. The index may continue soaring as bulls remain in control.