US EQUITIES RALLY FADES AS CRUDE OIL GAINS MOMENTUM

US equities declined on Tuesday as investors reacted to the new European sanctions on Russia and the likelihood of higher inflation. The Dow Jones and Nasdaq 100 indices declined by over 300 points. In a statement, the European Commission said that it will place an oil embargo in retaliation for the Russian invasion of Ukraine. Russia will continue delivering oil to Europe via pipelines. Another severe penalty is that the bloc will stop its companies from insuring tankers carrying Moscow’s oil since few companies are ready to carry uninsured cargo. EU insurance companies have the biggest market share in the sector.

European futures point to a lower open on Wednesday considering that the measures come at a time when the bloc is facing record inflation. Data published on Tuesday showed that the bloc’s inflation jumped to a record high of 8.1% in May. This increase was higher than the 7.4% it faced in April and most of these gains were attributed to energy prices. Therefore, many EU companies are expected to operate at a disadvantage, considering that they have benefited a lot from cheap Russian oil and gas. European stocks will react to the latest EU manufacturing PMI data and a statement by Christine Lagarde.

The Australian dollar retreated slightly after the latest manufacturing data from Australia and China. In China, data by Caixin showed that the manufacturing PMI increased from 46 to 48. This data implies that the sector made some improvements as many cities started to reopen. Meanwhile, data from Australia showed that the country’s economic growth slowed in the first quarter after expanding by 4.2% in Q4. Later today, the key events to watch will be global manufacturing PMIs and the interest rate decision by the Bank of Canada.

USDCAD

The USDCAD pair continued dropping ahead of the Bank of Canada interest rate decision. It dropped to a low of 1.2640, which was the lowest level since April 21st. It moved below the important support level at 1.2767. At the same time, it has moved below the 25-day and 50-day moving averages while the RSI and Stochastic Oscillators have diverged. The pair will likely continue falling as bears target the key support at 1.2550.

USDJPY

The USDJPY pair has been in a strong bullish trend in the past few days. It has risen to a high of 128.55, which was the highest level since May 19. The pair has moved above the 25-day and 50-day moving averages. The RSI and the momentum indicators have continued rising. The pair will likely keep rising as bulls target the key resistance at 129.

EURUSD

The EURUSD pair moved sideways ahead of the latest ADP jobs data. It is trading at 1.0730, which is slightly below this month’s high of 1.0800. On the four-hour chart, the RSI and the MACD have moved lower. It is also along the 25-day and 50-day moving averages. Therefore, the pair will likely remain in this range today.