On March 22, just before the Standard & Poor’s 500 bottomed out, the U.S. Federal Reserve announced it would begin buying an unprecedented array of assets, including corporate bonds, for the first time. The Fed, which later committed to buying up to US$2.3 trillion in assets, also said it would increase funding to its Exchange Stabilization Fund – which helps regulate the foreign currencies trade – and would purchase more U.S. government bonds and mortgage-backed securities.
The Fed’s decision to begin buying corporate bonds matters to stock investors because it ensures corporations can access credit markets and borrow at very low rates, which ultimately leads to higher profits down the road. Borrowing costs, or yields, on top-rated corporate bonds are about the lowest in at least a century.
This had a second positive impact on stock investors by signaling that the Fed’s unprecedented firepower will eventually be able to restore economic stability, mitigating concerns that the economic and health crises would cause a financial crisis. In just the past few weeks, the amount of securities held by the central bank has swelled from under $4 trillion to $5.96 trillion as of June 3 because of its massive purchases of various securities.
So in a nutshell, despite the dire economic situation still sharply felt by so many, particularly consumers, investors have been fueling and experiencing a sudden bull market, built on optimism that the Fed has put a bottom under the economy – just as it did during the Great Recession in 2008.
The downward movement means the weakening of the Australian dollar against the US dollar. The main reasons for this may be the worsening of US-Chinese trade relations. China is the main buyer of Australian commodities. In the 1st quarter of 2020 Australia’s GDP fell by 1.4%, which is generally normal amidst the coronavirus pandemic. Key macroeconomic data seem rather neutral, except for the situation on the labor market. Unemployment in Australia in April hit a 5-year high of 6.2%. May data will be published on Thursday morning, June 18th. The forecasts are very optimistic. If the reality turns out to be worse, then this may strengthen the emerging Australian dollar correction. In the meantime, the decline is more technical in nature. There has been a correction after an increase of 27% from the 18-year low in March this year.
The Critical Investor takes a look at the current dynamics of the lithium market, and speaks with the Standard Lithium’s CEO about the firm’s latest news.
After Standard Lithium Ltd. (SLL:TSX.V; STLHF:OTCQX) managed to close an almost two-times oversubscribed CA$12.1 million capital raise on Feb. 21, 2020, the company is financed at least into the “proof of concept” completion of its demonstration plant, and the subsequent consummation of the formal joint venture (JV) with Lanxess AG (LXS:DE).
The timing couldn’t have been better, as the COVID-19 pandemic gathered speed at the same moment, severely dampening sentiment at, for example, the mining industry’s premier event, PDAC, in the first week of March.
With the funding secured, Standard Lithium proceeded as quickly as possible, abiding by COVID-19 measures at the Lanxess location, resulting in the announcement on May 19, 2020, of the successful commissioning and commencement of continuous 24/7 operation of the demonstration plant, first of its kind at this scale, this month.
In the meantime, lithium product prices kept on falling, so as these are interesting times, it certainly is time for an update, further illustrated by input from CEO Robert Mintak.
All presented tables are my own material, unless stated otherwise. All pictures are company material, unless stated otherwise. All currencies are in U.S. dollars (USD), unless stated otherwise.
Standard Lithium recently announced the successful start-up of the industrial-scale direct lithium extraction demonstration plant at Lanxess’ South Plant facility in southern Arkansas (the site) on May 19, 2020. This plant, using LiSTR direct lithium extraction technology, had been successfully commissioned on May 15, 2020 and is now operating on a 24/7 basis, extracting lithium directly from the tail brine of Lanxess’ bromine operations.
Standard Lithium is now involved in systematic optimization to fine-tune the plant, which is a highly automated, three-story demonstration plant including an integrated office, control room and laboratory, and investigate how performance can be improved further. The most important features of the technology, per the news release, are that it:
Produces lithium chloride (LiCl) directly from unconcentrated raw brine;
Reduces recovery time from months to less than a day;
Eliminates the massive environmental footprint of evaporation ponds;
Returns virtually all water to the source aquifer;
Is not affected by weather conditions;
Vastly increases recovery efficiencies to as much as 90%; and,
The demonstration plant is capable of an annual production of between 100-150 tonnes per annum of lithium carbonate equivalent (LCE). To be clear, the LiSTR demonstration plant extracts lithium from the Lanxess tail brine stream and produces a high purity lithium chloride solution (LiCl), similar to the output of the evaporation ponds process but much faster, done in hours instead of many months. The LiCl will be sent off-site and converted via a third party to battery-quality, 99.5%-purity lithium carbonate (Li2CO3).
The commercial operation would incorporate an onsite Li2CO3 conversion plant. Standard Lithium is working on its own Li2CO3 technology called “SiFT”. The SiFT technology utilizes processes from the pharma industry and includes artificial intelligence and robotics to self-optimize the crystallization process. A news release in March announced that a prototype pilot plant produced a better than 99.9% purity Li2CO3. Depending on the success of testing, either the SiFT plant or a standard plant will be constructed after the construction decision has been made.
In the meantime, the company is actively monitoring the COVID-19 pandemic and working closely with Lanxess to implement preventative measures at the site to safeguard the health of its employees and contractors. This results, for example, in funny site visit pictures like this:
Site visit at demonstration plant site
Some of the measures being put into place include:
Continuing operations at the site with the minimum staff present onsite as required;
Screening all contractors and external visitors to site for risk factors, as well as employees returning on shift change;
Requiring employees who show symptoms or are in close contact with someone with symptoms to stay home from work;
Suspension of all international travel and requiring employees returning from travel outside of the USA or Canada to self-isolate for the government recommended 14-day self-quarantine period;
Implementing work-from-home practices where possible, including ongoing process engineering and optimization work at the company’s LiSTR demonstration plant;
Reducing in-person meetings and transitioning to videoconferencing where possible, as well as restricting any large gatherings;
Enhanced cleaning and disinfecting protocols at the site on hard surfaces and especially at touch-points; and,
Promoting personal preventative measures, such as frequent handwashing, and increasing awareness of social distancing practices.
According to CEO Robert Mintak, the impact of COVID-19 on the project has been managed exceptionally well, with the technical team in Canada working virtually with the operations team in Arkansas. The impact to the timeline has been about eight weeks, but compared to peers that have been largely stalled or halted during the pandemic, Standard was able to push further ahead. A preliminary feasibility study that has been planned has been impacted by the travel ban. A release date will not be certain until international travel returns to somewhat normal.
I feel this is very reasonable, and even in line with normal project/study delays across the board of junior mining companies. The real outbreak of COVID-19 in March didn’t leave the Standard Lithium chart unharmed, as can be seen here:
Looking in hindsight, the mid-March panic was a perfect buying opportunity. But many were probably expecting much more bad news, or a limited dead cat bounce at best, as the U.S., as the leading economic power, was gearing up to become the epicenter of the pandemic, with a president who initially denied a crisis and compared COVID-19 with the flu. The difference is there is a vaccine against influenza, and not against COVID-19.
However, the virtually unlimited financial support programs from the central banks and governments seemed to provide sufficient oxygen for the markets, resulting in strong and lasting recoveries of indices and almost all individual stocks. For now, Standard Lithium has fully recovered and more, reaching highs not seen since Q4/2018, and is working toward the all-important technology proof of concept, the consummation of the JV with Lanxess and a final investment decision.
As a reminder: This demonstration plant is roughly designed at 1/60 scale of the target production capacity of the first phase of commercial production, and should provide sufficient testing data this quarter for a planned, upcoming prefeasibility study (PFS). If the testing is successful and the JV formed, it should be a straight path for the contemplated phased commercial production development, after the investment decision would have been made by Lanxess.
The base-case economics used indicate a pretty robust lithium project. At a capex of US$437 million, an operation can be constructed with an after-tax net present value 8 (NPV8) of US$989 million, and an after-tax internal rate of return (IRR) of 36%, based on an average, long-term LCE price of US$13,550/ton (US$13,550/t).
However, we are nowhere near such lofty price levels anymore, unfortunately. In this useful article by Matt Bohlsen on Seeking Alpha, we can find a monthly update on lithium pricing, which I find to be very useful when doing due diligence on lithium companies: Fastmarkets quotes an LCE price of US$7,500/t (coming down from US$8,750/t in February), and lithium hydroxide prices of US$9,750/t . Benchmark Mineral Intelligence (BMI) has April prices at US$6,582/t for Li carbonate (coming down from US$7,922/t in February), US$9,125 for Li hydroxide, and US$420 for spodumene (6%). What I find fascinating is that the hydroxide price gap with carbonate remains constant in absolute terms, resulting in a larger and larger relative difference, potentially indicating higher fees being calculated by converters in Asia.
The trend keeps following a downward path, including a new drop in April/May, probably caused by COVID-19 fallout, as can be seen here in this chart coming from Fastmarkets (paid for link, chart provided by Bohlsen on Seeking Alpha.com):
As the lithium carbonate market seems to be oversupplied, and demand is weakening further due to COVID-19, the short-term outlook isn’t particularly healthy. For the long term, I have seen market scenarios contemplating US$9,00010,000/t LCE, but we aren’t there yet.
Therefore I again reworked the lithium sensitivity, where three scenarios are presented, the 20.9kt LCE pa (per annum) base case, and the hypothetical 30kt LCE pa expansion scenarios, as I calculated them in my first article on the company:
A current US$7,228/t LCE price, which is roughly a midpoint of Fastmarkets and BMI estimates, would generate a hypothetical NPV8 of about zero, and a hypothetical post-tax IRR of 9.2%, which would render the project not economic, as lithium projects usually need an IRR of at least 25%.
As the Lanxess project has one of the best economics for lithium projects around, almost no project is economic these days. These figures are based on 100% project-ownership economics. As stated in the past, Lanxess is committed to provide project finance to the JV when testing and the PFS are successful for them, and Standard will probably be an estimated 30% JV partner (according to company documents filed on SEDAR). I asked CEO Robert Mintak this, and other questions, in the following short interview:
The Critical Investor (TCI): Thanks for taking the time to conduct this short interview. First I wanted to ask you for a quick update on several basic items. Could you tell us what your current cash position, after raising CA$17.1 million in Q4/2019-Q1/2020?
Robert Mintak (RM): We closed a non-brokered financing in February for just over CA$12 million, which has allowed us to continue advancing the project. We have a team of roughly a dozen at the plant in El Dorado and a handful working in Canada. At the end of Q3, March 31, 2020, we had roughly CA$7 million, which we are deploying strategically to achieve our immediate milestones while managing the runway.
TCI: Could you explain to us what optimization steps you and your team are undertaking, and to what kind of improvements these could lead, possibly in terms of NPV/IRR increase, or capex/opex decreases?
(RM): Without going into a lengthy description, the ongoing operations, testing and optimization steps are similar to any piloting stage. On the LiSTR process specifically we will be testing for effective lithium recoveries, concentration and purity, residence time in the loading, washing and stripping reactors, water and energy consumption, and adsorbent life cycle performance and reagent recovery and optimization.
TCI: When do you expect to get publishable useful numbers on costs, finally showing commerciality of the proprietary extraction process, maybe not at current LCE prices but, for example, at US$10,000/t levels?
RM: The price today of battery-quality lithium carbonate is not the same as what is being reported. Pricing out of Japan and Korea is above $10,000. We will be modeling the project economics based upon well-thought and researched pricing models for battery-quality (BQ) lithium over the next number of years. COVID-19 has had an impact on the sales of electric vehicles (EVs) and other consumer goods, however, the economy coming out the pandemic will be different than the economy prior. EVs and renewable energy, which includes stationary storage, have been prioritized as part of new era of dirigisme that is being displayed by many of the world’s largest economies. The lack of investment in the raw material supply chain, new lithium production, along with importance of localizing production and decoupling from China-centric critical supply, will elevate the value of a U.S. producing lithium asset.
TCI: What about the SiFT pilot processing plant? Do you still anticipate delivery to the Arkansas site in mid-Q2, or did COVID-19 slow things down here as well?
RM: The SiFT plant is fully mechanically built and paid for. We will begin commissioning soon. Instead of shipping the plant to Arkansas as originally contemplated, because of the COVID travel restrictions, we will commission the plant in Canada by shipping LiCl from Arkansas to Canada. The same results, but this will save money and time. We will at some point, when travel returns to normal, ship the SiFT plant for installation in Arkansas.
TCI: When is the PFS expected? Try to be as specific as possible.
RM: COVID travel restrictions will determine the PFS timing. The PFS will require site visits by several qualified persons (QPs). With the current pandemic and other elements it would be out of place to provide a specific timeline.
TCI: If possible, could you indicate to the audience your expectations for PFS economics, as compared to PEA economics?
RM: The PEA that was released in Q3/2019 took a very conservative stance. We believe the data from the demonstration plant, combined with some other key cost input efficiencies like reagent recovery, will improve the already attractive project numbers by a healthy percentage.
TCI: As mentioned in the paragraph before this interview, prices for lithium products have dropped off significantly, even rendering the project uneconomic. I know you are optimizing project economics, but a drop from US$10,000 being the minimum of being economic, to US$7,000 nowadays, is probably more than can be restored by optimization. How are you dealing with this, and more importantly maybe, do you know how Lanxess is dealing with this? Do they have a certain higher-price scenario for the long-term future in their heads, and will continue with a construction decision as long as a certain minimum LCE price will result in an economic project?
RM: As I mentioned earlier, I disagree with the sub-$10,000 pricing scenario for battery-quality lithium carbonate. And I state, regardless of the pricing today, the industry is going to be facing a day of reckoning in the near future for the lack of investment in new projects capable of producing battery-quality lithium chemicalsnot spodumene concentrate, rather fully integrated lithium chemical production. This will likely result in a spike in pricing much like what we saw from 2015-18.
TCI: I read something in the PEA recommendations about adding a unit, which could use direct raw brine, without using the tail brine of the Lanxess bromine operation. Is this still an option?
RM: The LiSTR process is not affected by bromine being present in the brine. So yes, we are looking at the entire opportunity in south Arkansas, which represents a much larger number than what was considered in the PEA.
TCI: Do you have anything else to add for interested investors?
RM: The project is incredibly exciting, and potentially disruptive for the industry. A number of companies have been promoting direct lithium extraction, black boxes and magic beads, for years, but the approach we have taken has been project-focused and methodically executed. We now have an operating direct-extraction plant while still pre-commercial. This is at a scale no one has ever done before. We are just at the starting line and things are going to get even more exciting as we go into the next phase.
Conclusion
After COVID-19, the world seems to have changed. Fortunately, Standard Lithium managed to raise CA$12.1 million right before things got serious, and commenced their demonstration plant after small delays. On the process side of things, the project is running quite smoothly despite COVID-19. On the lithium product-pricing side, things don’t really cooperate.
However, according to CEO Robert Mintak, real contract pricing for lithium products in Japan and South Korea, being major battery producers, is hovering close to US$10,000, which would still render the Lanxess project economic with an after-tax IRR of 25%, as one of very few lithium projects.
After COVID-19 restrictions are no longer necessary, Standard can complete its upcoming PFS, which will likely show improved economics. Directly after this, a Lanxess construction decision awaits.
I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, and follow me on Seekingalpha.com, in order to get an email notice of my new articles soon after they are published.
The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.
Disclaimer:The author is not a registered investment advisor, and currently has a long position in this stock. Standard Lithium is a sponsoring company. All facts are to be checked by the reader. For more information go to www.standardlithium.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.
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China’s latest factory gate figures indicate that the declines were faster than forecast. Official data showed that factory prices fell for the fourth consecutive month, reflecting weak demand.
Headline PPI shrank 3.7% on a yearly basis in May. This comes after a 3.1% decline in April. The drop was the biggest fall in PPI in nearly four years.
Eurozone GDP Contracts at Fastest Pace in 25 years
Economic activity in the euro area fell at the fastest pace in 25 years, official data showed last week. Data from Eurostat saw gross domestic production fall 3.6% on a sequential basis in the first quarter of this year.
However, the pace of declines was somewhat better compared to estimates of a 3.8% decline. The drop in the first quarter reversed a modest 0.1% increase in the fourth quarter of 2019.
Eurozone Private Sector Remains in Contraction
Private sector business in the eurozone continues to reel under the effects of the lockdown. The latest survey results from IHS Markit showed that the final composite index rose to 31.9 in May.
This follows the indicators hitting a record low of 13.6 in April. According to the report, the eurozone GDP might contract by over 9% this year.
US Consumer Prices fall at Slower Pace
Consumer prices in the United States saw a slower pace of declines in May. Data from the Labor Department showed that inflation fell a modest 0.1% in May. This follows April’s decline of 0.8%.
Energy prices were a bit better, falling just 1.8% in May, after a 10.1% drop in the month before. Food prices rose by 0.7% during the month. Core inflation, which excludes food and energy prices, also fell by 0.1%.
In its economic projections, however, the central bank is of the view that interest rates will remain near zero into the end of next year. There was also talk of possible expansion to the economic stimulus as well.
Upcoming Economic Events
China’s Industrial Production to Rebound for 3rd Consecutive Month
Industrial production figures from China are due this week. Economists forecast that industrial production will continue to recover. After falling 13.5% for January and February, there has been a steady improvement.
In April, industrial production grew at a pace of 3.9%. For May, economists forecast an increase of 5.0%. Later, retail sales data is also due.
Forecasts point a fall of 2.3%, which is somewhat slower compared to a 7.5% decline in the previous month.
BoJ to Keep Monetary Policy Steady
The Bank of Japan will be holding its monetary policy meeting on Tuesday. Interest rates are forecast to remain steady at -0.10% and the central bank will also be most likely keeping its stimulus plan unchanged.
The BoJ might, however, maintain a cautious tone given the GDP contraction in recent months. Alongside the decline in domestic growth, bleak global demand will probably urge policymakers to maintain an accommodative monetary policy.
UK Unemployment Rate to Rise to 4.7% in May
The monthly labor market report from the UK will be out this week. Following a GDP contraction, the unemployment rate is now expected to rise to 4.7%. This comes after the previous month’s rate was at 3.9%.
The last time the UK’s unemployment rate was at 4.7% was in April/May 2017. Wages, as per the average earnings index, are forecast to rise at a slower pace of 1.4%.
The labor market report comes ahead of the BoE meeting due on Thursday. Speculation is rife that the central bank will boost its asset purchases by an additional 100 billion GBP.
US Retail Sales to Recover from April’s Lows
Retail sales out of the US this week might offer some cheer. Economists forecast a rebound in retail sales activity.
Headline retail sales are forecast to rise by 7.4% in May, after falling 16.4% earlier. Core retail sales are forecast to rise by 5.5%, recovering from a 17.2% slump a month ago.
The data comes during the time when the United States has been slowly relaxing the lockdown measures. Later during the week, Fed Chair, Jerome Powell is expected to testify to the US Congress.
New Zealand GDP Set to Contract 1% in Q1 2020
New Zealand will be releasing its quarterly economic report this week. Economists widely believe that the New Zealand economy shrunk by one percent during the first three months of the year.
This completely reverses the 0.5% increase in the fourth quarter of 2019. It will also mark the first quarterly GDP contraction since 2009.
The Japanese yen continues to show resilience against the US dollar after hitting April’s low. The Federal Reserve’s dovish outlook has injected some discomfort into investor sentiment.
Meanwhile, the Bank of Japan may follow the Fed’s steps and issue guidance on how long it intends to keep its low-interest rates policy. Risk-off plays are likely to dominate the market theme this week, giving the yen an extra boost.
The greenback is heading towards the psychological level of 106.00. A bearish breakout could trigger a broader sell-off towards 103s. On the upside, buyers will need to lift 109.90 to hope to turn the mood around.
GBPAUD Consolidates Near 8-Month Low
The pound sterling is hovering above last October’s low against the Australian dollar after a lengthy rally in riskier currencies. Britain’s economy showed a 20.4% monthly contraction in April, beating the already weak consensus. In an effort to maintain the stimulus momentum, the Bank of England is expected to top up its bond-buying program by at least another 100 billion pounds on Thursday.
The pound would find buying interests as long as it stays above the key support of 1.8100. The 30-day moving average (1.8650) is the immediate resistance in case of a rebound.
USDCHF Drops Ahead of SNB Meeting
Last week’s Fed policy meeting has put a dent in the latest euphoria across financial markets. What if the V-shaped recovery only exists on paper but not in the real economy? The US central bank has decided to face the reality check and signaled to keep interest rates near zero until the end of 2022.
As the US dollar weakens, this turns out to be a headache for the Swiss National Bank, which is eager to contain its currency’s appreciation. Volatility is expected to spike as markets await potential SNB intervention. The pair has broken below the support level of 0.9500. The next target would be 0.9330 with 0.9650 as the immediate resistance.
CADJPY Tempers Advance as Oil Prices Retreat
Investors’ risk appetite took a sharp U-turn last week as the prospect of a slow and lengthy recovery looms. Oil prices came under pressure after the US Fed admitted the hardship ahead in its latest guidance. This in turn has checked the Canadian dollar’s advance against the yen.
While this week’s CPI and retail data may stir up volatility in the loonie, the underlying global sentiment is likely to dictate its direction in the days to come. A recovery in oil prices could put a floor on the loonie against the safe-haven currency.
78.00 on the 30-day moving average is a strong support to maintain the bullish momentum. Failing that, 76.60 will be a major level to keep the rate afloat.
USDCHF falls as producer prices decline slows in Switzerland
Producer prices decline slowed in Switzerland in May: producer prices index declined 0.5% over month in May after 1.3% drop in April. This is bearish for USDCHF.
Trump’s presidency has been controversial, to say the least.
Yet, despite the many scandals and controversies, including impeachment, Trump has always seemed to land on his feet.
However, recent crises appear to have changed that narrative. It looks as though, for the first time, Trump is grappling with the very real possibility of losing his presidency.
This is out of character for a man who didn’t even seem to entertain that as an option during his impeachment trial.
China Trade War Damaged Support
The trade war with China was initially positioned as a national rallying cry for the country’s agricultural and manufacturing workers. However, it eventually went on to damage the very sectors it was supposed to support.
Farming and production both suffered severely as a result of Trump’s tariff war. As such, his longstanding support within this demographic became heavily diluted.
Towards the end of 2019, however, it looked as though some of this support was returning. This came as Trump proclaimed himself the champion in the war, achieving a “great victory” for the country’s farmers and manufacturers as a result of his watered-down trade deal with China.
Trump Blamed Over COVID
That said, his diluted support then weakened further as the COVID crisis ballooned.
Trump initially faced criticism for being slow to act. He then was blasted for being inefficient in providing PPE and testing. And, ultimately, he was condemned for moving out of lockdown too quickly.
In all three circumstances, though, he provoked outrage for wasting countless American lives.
His attempts to deflect criticism by placing blame on China and re-igniting tensions there failed to garner support from American voters. In fact, the public blamed Trump for the excessive loss of life due to his missteps in dealing with the crisis.
Poor Judgement During Protests
Social and political unrest ballooned following the killing of George Floyd over a fortnight ago. Now, this appears to be presenting a devastating threat to President Trump’s re-election chances in November.
Trump faced criticism for meeting the national protests with a poorly judged authoritarian approach. This mainly included his threats to deploy troops nationwide.
Trump has been caught off-guard throughout the course of the entire situation. Protests are now running across two weeks in more than 700 US cities. And, throughout it all, the president has appeared outdated, antiquated, and in many circumstances has been accused of racism himself.
Trump Announces Campaign Rallies
In an apparent effort to help address his plummeting poll rankings, Trump has now announced that he will be taking to the campaign trail.
He seems to be hoping for high media coverage of the packed rallies of his election campaign, in order to lift his ratings the president, This, in turn, is placing him under fire for dismissing the importance of the BLM protests as well as the threat that still remains from COVID-19.
The US infection rate topped 2 million last week. Meanwhile, the death toll still sits at around 1000 people a day.
In a further sign of ignorance, Trump announced his first rally date as June 19th.
June 19th, AKA Juneteeth, the national celebration day for black emancipation.
As a result, he eventually had to move the date to the next day following widespread criticism.
Bearing all this in mind, it seems quite clear that Trump is somewhat desperate now that he sees his re-election chances plummeting.
However, with both the civil and humanitarian crises still raging in the US, it seems unlikely his rallies will do little other than damage his ratings further.
DOW Hits Important Technical level
The DOW JONES suffered its largest daily drop last week since the COVID crisis began. Price failed at the test of the 27435 resistance. It has since traded back down to retest the bullish trend line. This is holding for now.
The trend line has been a key pivot for price action over the last year and a break back below the level and 24624 support will put focus on the 22943 level next.
At the start of another June week, Brent remains under bearish pressure. The asset is trading at 37.58 and has significant reasons for that.
The key thing that triggered these sales in the instrument is investors’ concerns about the slow growth of the demand for commodities – not as active as expected. These concerns only got worse after the American report on the new cases of the COVID-19 showed kind of the start of the second wave. There was an upsurge in the number of new cases after the country had seen flattening of the curve, which really made people think about a new wave of the outbreak. If so, it is a serious threat to the oil price demand recovery.
Apart from this, the oil had a technical reason for a correction after a flashy growth before. The “black gold” really seemed “overbought” and one “spark” was enough to start a correction.
In the H4 chart, Brent is moving within the downtrend towards 37.00. Later, the market may correct to the upside to reach 39.55 and then form one more descending wave with the target at 35.80. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving below 0, thus implying further decline of the price chart towards the above-mentioned target.
As we can see in the H1 chart, Brent has broken 38.00 to the downside. Possibly, the pair may fall with the short-term target at 37.00. After that, the instrument may start a new correction to test 39.70 from below. Later the market may form one more descending wave to return to 37.00. From the technical point of view, this scenario is confirmed by Stochastic Oscillator: its signal line is mo0ving below 20. In the future, the line is expected to grow to reach 50, fall to return to 20, and then start a new rising movement towards 80.
Disclaimer
Any predictions contained herein are based on the author’s particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.
After finishing the descending wave at 1.1220, EURUSD is correcting towards 1.1307. Later, the market may fall to reach 1.1259 and then grow to complete the correction at 1.1338. After that, the instrument may start a new decline with the target at 1.1200.
GBPUSD, “Great Britain Pound vs US Dollar”
After completing the descending wave at 1.2500, GBPUSD is expected to start a new correction with the first target at 1.2577. After that, the instrument may form a new descending structure to reach 1.2525.
USDRUB, “US Dollar vs Russian Ruble”
USDRUB is correcting towards 70.41. After that, the instrument may fall towards 69.16 and then grow to reach 69.80, thus forming a new consolidation range. If later the price breaks the range to the upside, the market may continue the correction to reach 71.40; if to the downside – resume trading downwards with the target at 68.06.
USDJPY, “US Dollar vs Japanese Yen”
USDJPY is falling towards 106.95. After that, the instrument may consolidate. If later the price breaks the range to the upside, the market may start another correction to reach 108.20; if to the downside – resume trading downwards with the target at 106.00.
USDCHF, “US Dollar vs Swiss Franc”
After finishing the ascending impulse at 0.9552, USDCHF is expected to fall towards 0.9450. Later, the market may grow to break 0.9555 to the upside and continue trading upwards with the target at 0.9625.
AUDUSD, “Australian Dollar vs US Dollar”
AUDUSD is forming a new descending structure towards 0.6778; right now, it is consolidating around 0.6853. Possibly, today the pair may break the range downwards 0.6854 and then start another decline to return to 0.6778. After that, the instrument may resume growing with the target at 0.6922.
BRENT
Brent is consolidating around 38.25. Today, the pair may fall to reach 36.39 and then grow towards 39.64. Later, the market may form a new descending structure towards 35.65 to finish this wave and then resume trading upwards with the target at 40.50.
XAUUSD, “Gold vs US Dollar”
Gold is falling to break 1721.00. After that, the instrument may continue trading downwards with the short-term target at 1700.00.
BTCUSD, “Bitcoin vs US Dollar”
BTCUSD is falling towards 9059.00. Possibly, today the pair may reach it and then grow with the target at 9700.00. Later, the market may fall to break 9000.00 and then continue trading inside the downtrend towards 8000.00.
S&P 500
The Index is falling towards 2980.5. After that, the instrument may form one more ascending structure with the target at 3114.7 and then resume trading downwards to reach 2770.5.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
As we can see in the H4 chart, the divergence made XAUUSD fall and reach 23.6% fibo. The previous rising impulse intended to reach the high at 1764.86 but judging by the structure of an expanding triangle channel, the asset no longer has strengths for further growth. Hence, one can expect a new decline towards 38.2%, 50.0%, and 61.8% fibo at 1645.06, 1607.83, and 1570.90 respectively.
In the H1 chart, the ascending tendency has tested the local high at 1744.95. If the pair breaks this level, it may continue growing towards the key high at 1764.86 and then the post-correctional extension area between 138.2% and 161.8% fibo at 1773.35 and 1791.05 respectively. At the same time, a “Black Cross” on MACD indicates a possible decline to reach the low at 1670.60.
USDCHF, “US Dollar vs Swiss Franc”
As we can see in the H4 chart, after reaching 76.0% fibo, USDCHF has rebounded to the upside. At the same time, the rising impulse has tested the resistance at 50.0% fibo (0.9538). In this case, the market is expected to continue trading towards the high at 0.9901. However, one shouldn’t exclude another scenario, according to which the instrument may resume falling to reach the key low at 0.9176.
The H1 chart shows a more detailed structure of the current ascending tendency. One can see that the convergence made the pair start a new growth, which has already reached 38.2% fibo. The next rising impulse will be heading towards 50.0%, 61.8%, and 76.0% fibo at 0.9580, 0.9628 and 0.9686 respectively. The local support is the low at 0.9376.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
