Oil and stock prices reverse as tensions in China rise

The price of crude oil declined sharply as investors reacted to the ongoing crisis in Asia. In a statement, Beijing said that it would bypass Hong Kong’s parliament and implement national security laws, which have long been resisted by activists. With the new move, China will be at liberty to set security operations in the autonomous city. While the Hong Kong government has supported the bill, analysts believe that it will lead to protests and a confrontation with the United States. This in turn will affect demand for crude oil. 

The Japanese yen strengthened against the US dollar even as Japan reported weak inflation data. The country’s headline CPI dropped by 0.2% in April after being unchanged in March. The CPI rose by 0.1% on a year-on-year basis. In the same month, the core CPI dropped by 0.2% on a MoM basis and by 0.1% on an annual basis. Earlier on, the Bank of Japan left interest rates and the 10-year yield target unchanged. In the meeting, the bank decided to increase its financing for small and medium enterprises that have been hurt by the coronavirus pandemic. The bank will achieve this by giving money to banks to process the loans.

The British pound declined slightly after the ONS released weak April retail sales data. In April, the country’s retail sales dropped by 18.1% from March and by 22.6% from the same month last year. This was the worst decline on record. Without the volatile food and energy prices, consumer prices dropped by 18.4% on a MoM basis and by 15.2% on an annual basis. The ONS said that clothing prices, which declined by 50% was the biggest drag for the prices. These numbers came after the encouraging manufacturing and services PMI numbers released yesterday. In April, the UK budget deficit widened to a record $76 billion.

EUR/USD

The EUR/USD pair declined to an intraday low of 1.0887, which was the lowest level since Monday. On the four-hour chart, the price is between the 38.2% and 26.3% Fibonacci retracement level. The price is also between the 25-day and 50-day exponential moving averages. Also, the price is between 1.1015 and 1.0727, where it has been since April. Therefore, there is a possibility that the price will continue to drop as bears attempt to test the 23.6% retracement at 1.0835.

GBP/USD

The GBP/USD pair dropped to an intraday low of 1.2160 after the disappointing retail sales data. On the four-hour chart, the price is slightly above the 38.2% Fibonacci retracement level. The price has also moved below the Ichimoku kinko hyo cloud while the RSI has been on a downward trend. There is a possibility that the pair will keep dropping as bears target the previous low of 1.2078.

XBR/USD

The XBR/USD pair declined sharply today as the market remain concerned about tensions in China. The price reached an intraday low of 33.91, which is significantly lower than this week’s high of 37.24. On the four-hour chart, the price is along the 38.2% Fibonacci Retracement level. It is also slightly above the 25-day and 50-day EMA. There is a possibility that the price will move back up as bulls attempt to retest the 50% retracement at 39.38.