Crude oil soars as business activity improves in Europe
The euro gained against key currencies as traders reacted to the latest manufacturing and services PMI. The data, compiled by Markit, showed that manufacturing PMI rose to 39.5 in May. That was a better performance than the reading of 33.4 in April. Similarly, the services PMI doubled from the previous 12.0 to 28.7. The positive manufacturing and services PMI led to the composite PMI to jump from 13.6 to 30.5. These numbers show that the eurozone’s contraction may have bottomed as countries start to reopen their economies. They also show that the region is still in contraction because the three PMIs are below 50.
The British pound rose slightly after positive PMI data. The flash manufacturing PMI rose to 40.6 in May from the previous 32.6. This increase showed that manufacturers started to do business after Boris Johnson asked them to reopen. The important service sector also did well, with the PMI jumping from the previous 12.0 to 28.7. These numbers came a day after Andrew Bailey, the BOE chair said that the bank would consider negative rates if the economy continued to weaken. He also committed to more asset purchases to support the economy.
The US dollar weakened slightly after the latest jobless claims data. The numbers showed that more than 2.43 million Americans filed for jobless claims in the previous week. This was slightly higher than last week’s claims of 2.4 million. Still, the number shows that more than 35 million Americans have filed for unemployment claims in the past few weeks. Meanwhile, data from the Philadelphia Fed showed that the manufacturing index declined by -43.1 in May. This was slightly better than the previous decline of -56.6. Later today, the currency will react to the US manufacturing PMI, housing starts, and a statement by the Fed chair.
The EUR/USD pair rose slightly after the positive PMI data. The pair rose to an intraday high of 1.0986, which is the close to its highest level this week of 1.0999. On the four-hour chart, the price is slightly above the 38.2% Fibonacci retracement level. It is also a few pips below the important resistance level of 1.1018. It is also slightly above the 50-day and 100-day exponential moving averages while the RSI has moved to the overbought level. The pair may continue rising as bulls attempt to test the important support at 1.1018.
The EUR/GBP pair rose to an intraday high of 0.9000 after the improving manufacturing and services PMI data. On the four-hour chart, the pair has formed a trough pattern. It is also above the 50-day and 100-day exponential moving average and slightly below the 61.8% Fibonacci Retracement level. Therefore, there is a possibility that the upward trend will continue as bulls attempt to test the 61.8% retracement at 0.9030.
The XTI/USD pair rose to an intraday high of 34.38, which is the highest it has been since March 11. On the four-hour chart, the price is above the short and medium-term moving averages. It is also above the Ichimoku cloud while the RSI and Stochastic are in the overbought territory. Therefore, while the rally may continue, there is a possibility of a minor pullback.