• Wholesale sales in Canada rose more than expected in March.
  • WTI dropped below $60 to weigh on the loonie.
  • US Dollar Index jumped to fresh 2-year highs above 98.30.

The USD/CAD pair gained traction in the early American session and rose to a fresh weekly high of 1.3493 as the loonie failed to capitalize on the upbeat data and the USD continued to gather strength. As of writing, the pair was up 0.47% on the day at 1.3492.

According to Statistics Canada, wholesale sales in March increased by 1.4% on a monthly basis following February's dismal 0.2% reading and surpassed the market expectation of 0.9%. However, the pair didn't have a difficult time preserving its bullish momentum as falling crude oil prices weighed on the commodity-sensitive CAD. After closing the previous day 2.6% lower, the barrel of West Texas Intermediate extended its slide and fell to its lowest level in two months near $59.

On the other hand, the heavy selling pressure European currencies amid political uncertainties ramped up the market demand for the greenback and allowed the US Dollar Index to advance to its highest level since May of 2017 at 98.37 to provide an additional lift to the pair.

The IHS Markit's Manufacturing and Services PMI data will be watched next. Later in the session, several members of the FOMC are scheduled to deliver speeches, which are unlikely to receive a significant reaction from the market.

Key levels

• The prevalent risk-off mood underpins the commodity’s safe-haven demand.
• The ongoing USD bullish run seemed to be the only factor capping further gains.

Gold built on its intraday positive move and spiked to fresh weekly tops, around the $1284 region in the last hour, albeit retreated a bit thereafter.

With investors looking past Wednesday's release of the latest FOMC meeting minutes, which reaffirmed the central bank's patience stance on interest rates, deteriorating global risk sentiment boosted demand for traditional safe-haven status and helped the precious metal to catch some fresh bids on Thursday.

The recent escalation in the US-China trade tensions continued weighing on investors’ appetite for perceived riskier assets and the same was evident from a fresh round of selloff across equity markets. This coupled with a sharp intraday slump in the US Treasury bond yields further benefitted the non-yielding yellow metal.

The latest leg of a sudden upsurge during the early North-American session could further be attributed to some near-term short-covering move above 100-hour SMA, albeit the ongoing US Dollar bullish run kept a lid on any strong follow-through up-move for the dollar-denominated commodity, at least for the time being.

On the economic data front, the US initial weekly jobless claims came in better than expected and further fueled the greenback strength, lifting it beyond the 98.00 handle to near two-year tops. Thursday's US economic docket also features the release of manufacturing & services PMI, which might now be looked upon for fresh impetus.

Technical levels to watch

EUR/USD fell below 1.1110, hitting the lowest level since June 2017. The currency pair has been pressured by several factors.

Trade tensions between the US and China are not abating. Chinese President Xi Jinping talked about the "long march" and hinted that rare earth materials may serve as bargaining chips in the negotiations. US Treasury Secretary Steven Mnuchin said the US still intends to slap new tariffs on China.

The Federal Reserve does not plan to cut interest rates anytime soon. The meeting minutes from the latest rate decision revealed that the Fed remains in wait-and-see mode.

German Manufacturing PMI dropped to 44.3 points, indicating a contraction in the most important sector in Europe. Moreover, the IFO Business Climate from the largest economy dropped below expectations.

The EU elections are underway and populist parties are projected to make big gains, lowering the chances of further integration.

EUR/USD hit a low of 1.1107. Support is seen at 1.1025 and 1.0900. Resistance awaits at 1.1135 and 1.1170.

EUR USD tech analysis May 23 new lows

  • Prices of WTI break below the $60.00 mark.
  • EIA reported a nearly 4.5M barrel build on Wednesday.
  • Broad-based risk aversion weighs on crude prices.

Prices of the barrel of the American reference for the sweet light crude oil are sharply lower on Thursday, breaking below the psychological $60.00 mark, or new2-month lows.

WTI breaches the 200-day SMA

Crude oil has accelerated the downside after breaking below the key support at the 200-day SMA in the $60.20 region, always tracking US-China trade concerns and a moderate pick up in the risk aversion.

Prices of the West Texas Intermediate came under strong and renewed selling pressure today after failing to extend the weekly up move beyond the $63.70/80 band earlier in the week, where emerges a Fibo retracement of the October-December decline.

In the meantime, unabated jitters on the US-China trade war and escalating tensions around Huawei (in the US) and Apple (in China) have coupled with the uptrend in US crude oil supplies, particularly after the API and the EIA reported unexpected builds during last week.

What to look for around WTI

Prices of the WTI appear to have met moderate resistance in the $63.70 region, or multi-day peaks, sparking a sharp correction lower. In the broader picture, and supporting prices, appear rising US-Iran tensions, turmoil in Libya, the so-called ‘Saudi put’ and the ongoing OPEC+ deal to cut oil output. However, US-China trade concerns remain far from abated despite the lack of fresh headlines as of late and emerge as the main hurdle for a more serious advance in crude oil.

WTI significant levels

At the moment the barrel of WTI is losing 2.89% at $59.40 and faces the next support at $57.95 (100-day SMA) followed by $55.51 (38.2% Fibo of the October-December drop) and then $54.37 (low Mar.8). On the flip side, a break above $63.74 (61.8% Fibo of the October-December drop) would aim for $64.66 (high Apr.30) and then $66.46 (2019 high Apr.23).

Jan von Gerich, analyst at Nordea Markets, explains that the ECB’s April monetary policy account implies that the bank needs more data to guide its future monetary policy steps.

Key Quotes

“Despite the weakened outlook, entirely new easing measures are not on the table, as the ECB concentrates on forward guidance and the TLTROs.

  • The ECB is not close to announcing new monetary policy measures
  • Confidence towards the baseline economic scenario within the ECB weakened
  • Worries about lower inflation expectations on the increase
  • Governing Council far from united on the side effects of negative rates and the TLTRO terms – more data needed”

“The April monetary policy account did not include major new signals or hints about where monetary policy is heading. There was a lot of discussion on the economy and the uncertain outlook, with some Governing Council members were more worried than others.”

“The ECB’s baseline remains that while the manufacturing sector has taken a hit, the services sector continues to do better and the soft patch the economy is experiencing will turn out to be only temporary.”

“The incoming economic data have not been all bad since the April meeting. Q1 GDP numbers surprised to the upside as did April inflation, while the recent PMIs raise new worries. Against this background, the ECB is probably not feeling an immediate need to act. While we expect another extension of forward guidance and relatively easy terms for the targeted longer-term refinancing operations (TLTROs) to be announced in June, further important data releases, such as the May inflation number on 4 Jun, will be out before the meeting and will impact the decision.”

Oil daily chart

On the daily chart, WTI (West Texas Intermediate) is declining sharply as it is now trading at levels not seen since late March. WTI is trading below its 50 simple moving averages (SMAs) while testing the 200 SMA near $60.00 a barrel.

Oil 4-hour chart

WTI is trading below its main SMAs suggesting bearish momentum in the medium term. A break below 60.00 figure can open the gates to the 58.00 support.

Oil 30-minute chart

In the short term, bears can target 59.50 and the 59.00 figure to the downside. Resistance is seen at 61.50, 61.00 and 62.80 levels.

Additional key levels