Today’s PMI readings could be good example of the almost blind optimism in the markets. PMI readings for the Eurozone and the UK are expected. Spain is expected to see the service sector pmi rebound from 7.1 to 25 in May, whilst activity in Italy’s service sector is expected to have jumped from 10.8 to 26.5. The optimists in the market will focus on the huge improvement in activity in the sector, whilst the pessimists would be drawn to the fact that activity remain deep in contraction. As they saying goes, optimism is blind optimism.
Unemployment figures in Europe are expected to show a slow creep northward. However, the headline numbers are not expected to climb as high as US due to a range of government programmes that pay companies to keep staff employed even when they are not working.
Today’s US ADP reading is expected to be another fine example of how keen the market is to ignore economic scars being left behind. Expectations are for a 9 million drop in private payrolls in May. A shocking number by all accounts. However, it would be a significant improvement on April’s 25 million decline. With the markets so focused on the recovery, May’s numbers are not expected to cause a stir.
The broad risk on sentiment, a weaker US Dollar and improving supply and demand fundamentals are providing support for oil prices. According to API data, inventories declined -0.483 million barrels in the week 29th May, versus the addition of 8,731 million barrels the previous week. Attention is turning to the June OPEC meeting; traders are finding some reassurance from indications that Saudi Arabia and Russia are moving closer to agreeing a deal to extend output cuts.
WTI levels to watch
WTI is trading +2.5% in early trade at $37.87, it remains above the ascending trendline on 4 hour chart as it continue to cross the gap back towards early March’s pre- coronavirus $40.00 level.
Immediate resistance can be seen at $38.15 (overnight high) prior to $40.
Immediate support can be seen at 36.80 (today’s low) prior to $36.11 trendline support and $34.30 low (June 1st)