Forex today: Daily analysis

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448

April 13: starting the week

More at: https://bit.ly/2K0cTYf

13.04.2020

Last week’s trading was passing in hopes for the positive result of the OPEC+ negotiation. The result is there now, and we will quickly scan it for the possible outcomes in the next paragraph. Apart from that, the British Prime minister’s treatment in the ICU was another big factor pressing on the Forex market. Lastly, European infection dynamics and the economic response preparations were the third large element that shaped the trade. What happened to each “story” and what do we have to start with week with? We will see them one by one.
Oil: good, but not enough

Let’s not be pessimistic: the deal is there. 9.7mln barrels per day will be the total supply quantity cut starting from May 1. The market applauded not only to OPEC+ but to Donald Trump personally. A hater of the cartel just a while ago, he is the one who finally convinced Mexico, Russia, and Saudi Arabia to get the deal done. Or so it seems. Anyway, that’s another ace for him to claim in preparing for the November election campaign. How does the oil price look now?

Not really impressive. The hopes for a “definitive victory” which were pushing WTI above $25 are largely erased: strategically, it is now closer to $20 than anywhere else. Why? Mostly, because this 10% output cut comes too late and is too little. The global demand now is roughly 30% lower than the pre-virus level at which the market was stabilized. Cutting 10% leaves the remaining 20% “in the air”. In addition to that, the date which makes the OPEC+ agreement effective is May 1 – that is three weeks away. During that time, the market will be in the free-for-all state. Meaning, everyone pumps as much as they want. That’s why the almost 10mln-barrel-per-day cut appears more like a reality-forced recognition gesture rather than a proactive forward-looking market rectification step.
Boris Johnson: the winner is out

This was the Sunday news headline about Boris Johnson:

Source: Bloomberg

It’s hard to deny that such a dramatic comment makes the victory of the British Prime Minister over the virus even more shining, emblematic, and inspiring. At least, to his British fellow citizens. It should have supported the British pound as well. Has it?

Indeed, the GBP rose to test 1.2540 against the USD. It broke the four-week resistance of 1.2450, converting it into the current support level, and left the Moving Averages below. Moving further upwards, however, will require something more fundamental rather than one famous individual’s (even if that’s a very important individual) victory over the disease. Does the UK economy have that? Time will show.
Europe: trench war

The infections picture in mainland Europe seems to be slowly improving. Spain, Italy, and France are reporting decreasing dynamics of the virus spread. The lockdowns are planned to stay in power for several weeks more, subject to authorities’ confirmation, to ensure that the virus spread is sealed. That pushes the biological threat to the second place and pulls the economic agenda into the front row of the agenda. Recently, a financial aid package was formed by the EU finance ministers, but the problem was for the country leaders to approve them. It remains a problem gives the political and economic discords between the states, and this week, we will say how this card is played. That should be the main reason why EUR/USD is now kept in a “waiting” mode.

Currently traded at 1.0932, it goes into consolidation between the resistance of 1.0970 and support of 1.0920. At the same time, the secondary layer of the movement channel is presented by the Moving Averages: 50-MA and 100-MA support the currency pair at around 1.0850, and 200-MA is capping the upside at 1.1030. Very likely, EUR/USD will be staying pretty silent until some decisive fundamental factor comes to the stage.

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Tesla stock: at full speed ahead. Why?

10:34 14.04.2020

We saw a huge surge of Tesla stock on April 13. It rebounded to its mid-March position. What were the reasons?
Oppenheimer’s analysis

The first reason is a bullish forecast from the reliable US investment firm - Oppenheimer. After their analysis had been released traders ran to buy Tesla shares, thereby pushing the price up.

Technical analyst Ari Wald noted Tesla stock as a “Triple Play”, what basically means that the stock will beat not only expectations on revenue and earnings, but also on earnings guidance for future quarters. He said that as long as the stock holds above the $390 support level, the stock is “bullish.” His colleague, fundamental analyst, Colin Rush kept an outperform rating for the stock. According to his forecasts, the price will be at $684 in 12 months.
Ramp in Giga Shanghai’s production

Another reason is an encouraging development in China, where auto sales are starting to the pick up again. Despite the shutdowns of plants because of COVID-19, the company’s factory in Shanghai shows a massive expansion. According to a recent press release, Tesla has started producing two more Model 3 variants at its Shanghai plant. That means Tesla can have a lower price without import duties. This would boost the company’s profit margin.
What’s next?

Now we are waiting for Tesla’s first-quarter report on April 29. It would definitely affect Tesla’s stock.
Short technical analysis

Let’s look at the Tesla’s chart below. The price broke through all moving averages. Now it’s on the 651 mark, a bit above 50% Fibonacci retracement level. The resistant line is on 717. The support line is on 579.

450

Market drivers on April 15

15.04.2020

Let’s see what’s moving market today amid the coronavirus pandemic. Some countries are recovering such as China, but most of them are still under pressure.
Donald Trump sanctions WHO for poor performance

US President Donald Trump has stopped financing the World Health Organization. The main reason for that is the WHO hadn’t restricted travels from China in time, that undermined the US. Also, Donald Trump voiced his discontent that the WHO became very China-centric. However, House Democrats said that Donald Trump violated the law as he had no legal authority to halt payments to the WHO.
US dollar may weaken

On the one hand, the Fed’s monetary easing and credit backstops help to mitigate the coronavirus negative impact on the economy. On the other hand, these measures put a heavy pressure on the US dollar. Later today we will see the report of retail sales that will show the economic damage of lockdowns. This report should somehow influence on the US dollar. Also, tomorrow on April 16 unemployment claims will be released. Some economists think that the jobless rate will reach 20%.
Good news for Pound sterling

There is a positive scenario for the British pound as the negative impact of Brexit has been eliminated by the coronavirus. According to Standard Bank, EUR/GBP will fall to 0.8 soon. The pound price couldn’t touch this level since 2016. As the deadline for a trade deal is postponed, the risk for the currency is pushing back too.
Oil price plummeted again

If you remember, OPEC+ after long negotiations had finally decided to cut the oil production. However, it didn’t help to push the oil price up. What we see today is the WTI oil price fell below $20 per barrel. That’s happened because the oil demand had dropped enormously. The International Energy Agency said that the worst is yet to come.

451

USD: fighting through

16.04.2020

Positive dynamic

There is definitely a positive dynamic in the labor market based on the figures announced by the labor authorities in the US this Thursday.

5.2mln people filing for unemployment benefits is certainly better than 6.6mln and 6.8mln as it was it the previous two weeks respectively. However, the figure was still slightly above the expected 5.1mln.

Reaction

How did the USD react? Relatively indifferently across the board, although a certain weakness is visible with USD/JPY as in the chart below.

Generally, the USD has stopped its advanced against other currencies leading the main currency pairs into a temporary consolidation to digest the incoming data. In the larger scheme, it is unlikely, however, that the investors will move away from demanding more US dollars to hedge against the virus damage.

For the USD/JPY specifically, it trades currenly at 107.46 testing the support of 100-MA at 107.38. In fact, the currency pair performance is now contained between the latter and teh resistance of 200-MA at 107.68. Crossing either of these will serve as a confirmation of further direction for this currency pair.

452

US: reopening economy

17.04.2020

Unplugging

On Thursday, US President announced that he is going to gradually steer the country out of the “full armor” state. He shared a three-stage plan which suggests that 29 states are now qualified to lift most of the quarantine measures within a month’s time.

“A national shutdown is not a sustainable long-term solution”.
Two questions

The authorities of the US are trying to minimize the time during which the country stays economically frozen because each day under quarantine costs a lot and contributes to the accumulating risk of recession. That is understandable.

The question is whether the states are ready for that: in some of them, the infections are still rising. Plus there is still a big problem to actually measure these infections because the testing methodology and equipment are not yet fully adequate.

Another question is: how effective this plan may be if the federal government practically shifts the responsibility to set the guidelines and monitor the lifting of the virus restrictions to the state authorities. There is generally very little detail and even less federal support presented in the several-page document Donald Trump referred to.
Reaction

Although similar doubts were expressed by observers and the prevailing reaction among them was unconvinced, the market took this news as a relatively positive sign. The US dollar eased a bit, gold eased a lot, stocks climbed.

453

WTI dropped below zero: what does it mean?

20.04.2020

Big news shake financial markets more and more often. This time oil is once again the biggest news maker.
What happened with oil?

West Texas oil futures expiring on Tuesday turned negative for the first time in history. Negative prices mean that sellers were actually paying buyers to take the stuff off their hands. Such a situation occured because the US economy is on the lockdown and, as a result, there’s so much unused oil that America is running out of places to store it.
How it works?

Crude oil futures is a futures contract, in which a seller agrees to transfer a specified amount of barrels of oil to a buyer at a specified price on a specific date.

Some market players, such as refinery companies, use futures to ensure that they will have a favorable price fixed for the future. Most traders, however, trade oil futures without waiting until the expiry date. They don’t want the actual oil, they just buy and sell oil futures to make money on the price swings. However, if they don’t get out of the position before the due date, they will have oil actually delivered to them.

There are oil futures for every month for years ahead. Trading terminates 3 business day prior to the 25th calendar day of the month prior to the contract month. In April 2020, such day is Tuesday, April 21. Physical delivery for these contracts should take place in May, but as the storage capacities are near the limit, the demand has plunged. Storage is especially scarce in Cushing, Oklahoma, where WTI May-dated futures contracts require futures buyers to take delivery of the oil. Hence, market players just wanted to get rid of these futures. There was a wave of selling and the price of WTI-20K dropped below 0.
What does it mean for other contracts?

Although, the futures market has experienced an impressive move, there’s no way this is an apocalypse. We can see that other contracts haven’t collapsed at all. For instance, WTI June prices (WTI-20M) are above $20 a barrel.

Prices for Brent futures fell, but the decline wasn’t dramatic at all and accounted for about 5% on Monday. Unlike WTI, Brent crude can be delivered offshore to a variety of locations, so if there’s a lack of storage in one place, oil will be just moved elsewhere.

All in all, the story will likely keep oil under pressure for a time being. Notice that with FBS you can take advantage of various oil futures, both buying and selling these contracts in the form of CFD.

1 Like
454

Very nice article, well done.

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455

Thank you so much for your support, really appreciate it.

456

Latest news you need to know

21.04.2020
Oil went below zero

The oil price dipped below zero the first time in its history and then rebounded back to its recent level at $21.45. That’s happened because for some oil producers it’s cheaper to pay buyers to take their oil than to stop production or rent a storage. Reasons are the demand damaged by the coronavirus and the unlimited supply created by Russia and Saudi Arabia. Even OPEC+ agreements on cutting the oil production by nearly 10% couldn’t save the industry. Click here to read more.
Dollar strengthened on North Korea news

According to Bloomberg, the health of North Korea’s Kim Jong Un is deteriorating after the cardiovascular surgery last week. The US dollar gained, Asian and South Korean stocks weakened after these news. South Korean and Chinese sources doubt about his weak health. They reported that he is recovering.
Good news for British pound

The UK Claimant Count Change was released today. The numbers are encouraging! Only 12,100 people lost jobs when 170,000 were anticipated. It might help the British pound to stabilize for some time, but the US dollar anyway has a stronger position on the market now.
Earnings reports are coming up

This time it’s more intriguing than ever before. As investors want to see how companies cope with the coronavirus impact. Today we will get earning reports from Netflix at 23:00 MT and Coca-Cola at 14.30 MT. Be ready to react quickly!

457

EUR and weak data from Germany

22.04.2020

Germany will release Ifo Business Climate Index on Friday at 11:00 MT time.

Instruments to trade: EUR/USD, EUR/GBP, EUR/JPY, EUR/AUD

You don’t have to be a fortune teller to say that German business will be hit hard by the coronavirus-related lockdown. In March, the index fell to 87.7 points from 96 in February, its biggest drop since 1991. This was the preliminary estimate: the final number turned out to be even grimmer: 86.1.It’s time to remember that Germany is the key economy of the euro area. When it falters, a shadow falls on the entire region and hence on the EUR. Such pairs as EUR/GBP and EUR/JPY will be especially sensitive to the news right after the release. As for the EUR/USD, it will move actively later that day when durable goods orders come out in America. The economy which shows less negative results will see its currency go up.

If German Ifo Business climate index is greater than the forecast, the EUR will rise. If the indicator disappoints, the EUR will fall.

Check the economic calendar

458

Gold shines as bright as $3,000

More at: https://bit.ly/2VRabtL

15:48 23.04.2020

At the beginning of the American trading session on April 24, gold unveiled its hidden powers and was trading quite close to the $1,740 level – its highest peak of April 14.

Many analysts continue to see the yellow metal ultra-bullish, thanks to COVID-19 and the world economy falling into recession. One of the most optimistic forecasts belongs to the Bank of America. The famous financial company recently raised its 18-month target from $2,000 to $3,000. That is more than 50% of the current price level! How crazy is that?

Among the major reasons for this kind of scenario analysts of the Bank mention increased fiscal stimulus and doubling balance sheets of the major central banks. According to their point of view, fiat currencies will not be as attractive as gold.

For this year, the Bank of America sees the price of a yellow metal hovering around $1,695. In 2021, the target level is expected at $2,063.

459

Friday’s news digest

Check https://bit.ly/2Ku5v7X

24.04.2020

Let’s see what drives the market on April 24.
US coronavirus aid package

There are good and bad news from the US. The bad one is that 4,427,000 Americans lost jobs. In total nearly 26 million people were fired because of the coronavirus. The good one is the 484-billion-dollar aid package was sent to those, who are struggling the most, small businesses and hospitals. It was the fourth relief package during the coronavirus crisis, their total sum passed 3 trillion dollars.
Oil climbed a little after dramatic fall

The WTI oil price rebounded to its previous level near $16 per barrel after its historic drop below zero. However, it will be a long way up to the pre-crisis price with the present massive glut and no visible rise in the demand side.
Stocks drop

European stocks slumped as the region’s leaders couldn’t come to the same opinion about how to mitigate the coronavirus impact in the long-term. Also, we have seen a slowdown in a global stock rally. It’s happened because the sentiment on the market is really negative these days. One of the reasons was that Gilead Sciences Inc.’s antiviral drug failed it first randomized clinical trial. As a result, all the hopes and dreams for the recovery disappeared.
UK retail sales drop

The monthly UK retail sales dropped dramatically by 5.1%. It was the largest fall over 30 years since records began. Most analysts anticipate the indicator to decline further in April by 20-30%. GBP is under the huge pressure now.
German Ifo Business Climate Index slump

The Ifo Business Climate indicator for Germany declined to 74.3 below expectations of 80. It is the historic low. The coronavirus spares no one, it stroke even the most sustainable and reliable German economy. EUR shouldn’t fall significantly but the short contraction could be.

460

Things to watch this week

27.04.2020

These days we’ve got a quite busy market and a really interesting environment. Events below will add more market volatility!
FOMC statement, press conference and US GDP

April 29 is a day of the USA. The Fed will have an important policy meeting at 9:00 MT. Nobody expects any major announcements. Investors wait for it mostly because of the guidance on future policy measures that will determine how fast the economy will recover from the crisis.

The US GDP is a significant indicator that will show the whole picture of the coronavirus impact as the economic activity fell down enormously in March and jobless claims reached unseen highs. It will be released on April 29 at 15:30 MT.
Important data from Eurozone

On April 30 at 14:45 MT time the ECB will release main refinancing rate and make a monetary policy statement. Also Euro area GDP will be released this day at 12:00 MT time. Some analysts expect it to fall by 4.5% for the first quarter, while it will be much worse for the second.
OPEC+ deal will start in May

The OPEC+ deal was to cut the oil production by 9.7 thousand barrels per day in May and June. However, it didn’t help to stabilize the oil market. While Donald Trump openly supports the US shale oil market, Saudi Arabia and Russia will continue their price war as they produce cheaper oil and can sustain its low price. We will see the oil price falling down further.
Earnings season of the largest companies

We are waiting for earning reports from Google, Microsoft, Facebook, Apple, Amazon, Intel and Tesla. This data will reveal their performance amid the coronavirus crisis. It will shake the stock market! Stay tuned!

461

How far can US GDP fall?

09:53 28.04.2020

American advance GDP will be released on April 29 at 15:30 MT. It will definitely move USD as it will show the broadest picture of the US economic health amid the COVID-19.

Instruments to trade: EUR/USD, USD/JPY, USD/CHF, AUD/USD, USD/CNH, USD/CAD

It’s obvious that the present US lockdown will lead to a decline of the GDP. What is more intriguing for investors is how bad the indicator will be. Among other economic indicators GDP is the most significant one as it reveals almost every area of the US economy. The largest part of it, nearly 70%, is money that Americans spend domestically. Consumer spending collapsed, that’s why the future GDP fall will be so huge.

How would you rate the coronavirus recession among other US downturns on the Richter scale, which measures the severity of earthquakes? Didier Sornette, who heads the Financial Crisis Observatory, assessed it at a magnitude of 9, when the crisis of 2008 – 8.5. The St. Louis Federal Reserve anticipates the real GDP to drop by 15%. The Atlanta Federal Reserve gave a much better forecast of a 0.3% decline. According to Goldman, GDP will contract by 10%.

If GDP is greater than its forecast, the US dollar will surge, otherwise – drop.

Be cautious! This is a general rule. These days, the US dollar plays a role of a safe-haven currency. That’s why USD won’t fall so deep as the US GDP.

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462

3 stocks that beat expectations

30.04.2020

Tesla, Facebook and Microsoft have outperformed analysts’ forecasts and ramped up after earnings reports. How is it possible amid the coronavirus crisis?
Tesla

Surprisingly, Tesla has managed to make a profit in the first quarter amid the global crisis. Elon Musk even didn’t mention the coronavirus in his letter to investors. The company earned 16 million dollars in the quarter, sales rose to 5.99 billion dollars from 4.54 billion dollars a year ago. The stock surged more than 9% after the report. Overall, Tesla shares increased by 36% in the last three months. However, the second quarter might be worse as people’s incomes reduced. Also, lower gasoline prices made people keep driving their petrol-driven cars. Despite these doubts, Tesla targeted the 40% annual growth.
Facebook

The Facebook revenue for the first quarter was better than expected(17.74 billion dollars), but earnings came worse because of the virus impact(4.9 billion dollars). Overall reaction to the report was positive and mixed results pushed the Facebook stock up by 10%. The outlook for the second quarter is still uncertain, but the company will make all efforts to mitigate the coronavirus effect. For example, last week it released Messenger Rooms, a video chat meeting service as an alternative to Zoom. Future perspectives are positive for Facebook.
Microsoft

Microsoft outperformed expectations that had been made before the coronavirus spread. It’s the only Dow Jones component to see its stock up in the first quarter. Microsoft reported 10.75 billion dollars earnings, or $1.40 a share, on sales of 35 billion dollars, up from profit of $1.14 a share on revenue of 30.57 billion dollars a year ago. Analysts anticipated earnings of $1.27 a share on sales of $33.76 billion. Microsoft shares rose more than 2% in after-hours trading. Also, the company has the Azure cloud-computing software that would help to offset the coronavirus damage as most companies need this tool to work from home. However, the company is not so confident about the future growth.

463

EUR is fragile: ECB statement on April 30

10:11 29.04.2020

The European Central Bank will unveil the refinancing rate and make the monetary policy statement on April 30 at 14:45 MT.

Instruments to trade: EUR/USD, EUR/GBP, EUR/AUD, EUR/CAD, EUR/CNH, EUR/CHF, EUR/NZD, EUR/JPY

Europe has been enormously damaged by the COVID-19. The IMF anticipates the GDP of the euro area to decline by 7.5% this year. There’s little the ECB can do to prevent the fall but it can mitigate the coronavirus impact.

The ECB has already taken some actions. Last month it effectively allowed Greek lenders to borrow from the central bank. Then, it has started accepting junk debts that shield sovereigns such as Italy from a downgrade. However, the ECB’s coronavirus program might expire by October if the central bank continues buying sovereign bonds at the same rate.

If there is no result, the bank would even have to try helicopter money. Just imagine, money that is falling out of a helicopter to the people below. However, it would not be the same in reality. According to Pictet Wealth Management, the ECB could offer money to banks at -1% under a condition that they grant 0% loans to their customers. Some analysts think that it could be a good option amid the present crisis.

Let’s see what the ECB will propose on April 30. Also the ECB press conference will be that day at 15:30 MT that often creates the heavy market volatility. Stay tune and remember:

If the ECB’s monetary policy statement is hawkish than expected, it will push EUR upward.

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464

GBP: April gains undone

04.05.2020

The GBP/USD currently is testing 1.2390 - that’s where it started its April march upwards. In other words, the victories of the previous month are written off for this currency pair. What does it mean?

Analyst comment that May is a seasonally low month for the GBP against the US dollar in particular. The fact that the British pound opened the month in such a weak way probably means that the entire month will be like that for this currency pair, if not further in the same direction. If that’s the case, prepare for the GBP/USD to hit the support of 1.2267 very possibly within a week or so. “Risk-off” is a password so far for this currency pair.

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465

Will the GBP advance on a strong BOE policy?

05.05.2020

The Bank of England gives the interest rate press conference on Thursday at 14:00 MT time.

Instruments to trade: EUR/GBP, GBP/USD, GBP/CAD, GBP/CHF

The last activity from the side of the Bank of England was a unanimous vote to keep the rate unchanged at 0.1% after it was reduced twice in March to respond to the virus damage. The policymakers expressed their commitment to support the economy and maintain a possibly favorable financial climate in the UK. The latter has been fortified by an extensive policy of quantitative easing the Bank has been implementing. Nevertheless, similar to other countries, an increase in unemployment is expected in line with economic damage in the nearest future. Coupled with Brexit, this period promises to be one of the toughest challenges for the British economy and the Bank of England. We will be looking into the details and subtle messages about the economic outlook in the report of the Bank of England’s policymakers while the rate is expected to stay steady.

If the bank’s message is optimistic, the GBP will rise.
If the bank’s message is not very optimistic, the GBP will fall.

466

May 2020 forex season trading

06.05.2020

April seasonal patterns weren’t supposed to work, but somehow they did. Even a strong fundamental issue such as the global recession amid the coronavirus couldn’t overwhelm it. That’s why May seasonal patterns may work as well.

However, it’s better to combine seasonal trading with technical and fundamental analysis. All together they will help you to make a successful trade.
Risk-off currency pairs

There is a good proverb: “Sell in May and go away”. It seems that it’s true for all currencies this month except safe-haven ones such as USD, CHF and JPY that will remain strong. According to Bloomberg, the US dollar index increased in 8 of the past 9 months of May. On average it rose by 1.53% in May over the past decade. Also, CHF should perform greatly in May as it’s the strongest month over the past decade for the franc against the US dollar. However, take into account that CHF has been fallen for last 3 years.
Risk-on currency pairs

AUD has recently showed the steady rise, but according to seasonal patterns it’s time to stop it as May is going to be a weak month for the aussie. The average May decline over the past ten years was 2.33%.
Euro

May will be the worst time for EUR/USD, EUR/GBP and EUR/CHF. EUR/USD was decreasing in 8 of the past 9 years. The average May decline was 1.76% over the past decade.
Pound

This month will be disappointing for GBP/USD as the US dollar will be more favorable for investors amid the economic uncertainty. However, EUR should perform worse than GBP, that’s why EUR/GBP can drop.

467

What drives the market on April 7?

07.05.2020

The main focus is on the UK as the Bank of England made an announcement this morning. Let’s see what’s happening with the British pound and what else moves the market today.
GBP

The pound surged higher after the BoE had reported that interest rates and quantitative easing would stay unchanged. Previously, the central bank maintained the interest rate at 0.1% and increased its bond-buying program by 200 billion pounds. Moreover, Boris Johnson, the British Prime Minister, promised to start reopening of the economy on Monday. As a result, the market sentiment turned positive and the British pound gained.
CNH, AUD

Surprisingly, Chinese exports rose by 3.5% while analysts expected the 11% drop. However, imports decreased by 14.2%, while only the 10% decline was forecasted. The overall sentiment after the report was positive that the second-largest economy may recover faster than anticipated, and the Chinese yuan jumped. Moreover, the Australian dollar gained on upbeat Chinese export data.
USD

Traders are waiting for tomorrow US unemployment rate, that is expected to be extremely high. Yesterday the ADP report revealed 20.2 million jobs lost that slightly exceeded the expected 20.5 million. That pushed the US dollar up.
Oil

The WTI oil price was growing up and then stopped on the $24 mark. As you remember, OPEC+ started to cut the oil production by 10 million barrels a day starting from May 1. It seems that the oil consumption is slowly recovering with the easing of lockdowns all over the world, but it may take a year to return to the pre-crisis level.