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May is even worse than April


22 May 2020

I'll start with the bad news - Incoming statistics for May shows the situation has deteriorated in comparison with April. Let me remind you that in May several European countries began to mitigate quarantine measures, and in Italy a large number of small shops reopened. Nevertheless, the incoming statistics indicate a further decline in business activity in the services and manufacturing sectors across Europe.

The business activity indices published on Thursday for the currency block and Britain came in below 50 points, indicating that in May the level of business activity was below the level in April. All European countries showed less growth in May compared to April which means the outlook for European currencies is pessimistic.

Let’s take a look at the GBP/USD currency pair, which continues to lose ground, on the back of declining retail sales and an increase in borrowed funds from the government. As a result, the risk of the currency pair returning to the psychological mark of 1.2100 continues to increase.

Now let's move on to the oil market. The collapse in oil prices is due to some changes in policies from China, which could lead to a significant decrease in oil demand. Nevertheless, don’t count on further weakness as shale oil production in the USA continues to decline. In addition, participants in the OPEC + transaction, which entered into force on May 1, continue to fulfill their obligations and this will contribute to a moderate increase in oil prices.
Due to the lack of statistics during the American trading session, trader’s attention will focus on incoming information about the conflict between the United States and China. An escalation of the conflict will contribute to higher gold prices.

I will complete the review with a deal to buy a USD/CAD currency pair. A long position was opened at the price of 1.3940 by two lots. A take Profit order is set at the next technical resistance level of 1.4020. At the time of writing the review, quotes of the pair reached the marked resistance level. Profit on this transaction amounted to $1,140.

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