Crude oil price continues to advance higher in European morning as driven by bullish sentiment and strong stock markets. The July contract rises above 66 and is going to test 67.3/68.8 which our technical team believed as critical resistance levels.

Although the strong trading momentum will likely extend further in the near-term, OPEC Secretary-General Abdalla El-Badri attributed oil's recent rally to sentiment rather than change in fundamentals. He said that speculation has come back to oil as well as other commodities. However, persistence in demand/supply imbalance was not supportive for prices. Considering production outside the cartel, El-Badri said the non-OPEC countries have not helped much as they continue to increase production with the exception of Mexico.

Stocks rally across the board. In Asia, Japan's Nikkei 225 Stock average rose 0.75% as driven by a series of better than expected economic data. Japan's manufacturing PMI rose 5.2 points for 46.6 in May. Moreover, industrial production increased +5.2% mom in April, more than consensus of +3.3% and +1.6% in the previous month. On annual basis, the gauge declined -31.2% following a -34.2% drop in March, suggesting the pace of contraction has slowed down.

In Europe, UK FTSE 100 Index rises 1.7% to 4461 while Germany's DAC and France's CAC 40 gain 1.4% in the morning.

Gold price for June delivery soars 1.4% to 976.3. The precious metal will likely rise 10% and record first gaining month after falling for 3 consecutive months in May. During the same period, the dollar index has dropped around 5% as massive credit easing policies adopted by the US government created much concerns about inflation and USD depreciation.

Since the beginning of the year, gold price seemed to have moved more inline with equity market rather than USD. However, the traditional negative correlation has been re-established again recently. Over the past few months, USD was treated as 'safe-haven' and was pushed higher as investors turned more risk adverse. While conventional wisdom tends to link movement of USD with risk aversion, a closer look into the data indicates that the 2 do not always move in same direction.

For instance, in mid-07 to mid-08, USD and VIX (also known as fear index) moved in opposite directions and correlation was found to be as high as -80%. Moreover, before 1990s, the relationship between the 2 was not obvious. Research showed that it's home bias that made USD and risk aversion move together. During market crisis or periods that stock markets are highly volatile, US investors purchase less foreign assets and prefer to stick to US markets when it comes to investments. Outright sales of overseas investment and repatriation of USD-denominated assets are seen.