Focus on the Fed, Oil and Netherlands Election today

The Ides of March has arrived at last with the potential for significant ‎market moving developments. US indices and the FTSE are up 0.2% so far today. The US Dollar is down slightly enabling GBP, EUR and CAD to bounce back while gold and JPY are holding steady.

The main event for the US today is the FOMC decision due at 200 pm. The Fed is expected to raise interest rates by 0.25% and it would be a huge surprise if they didn’t. Traders may focus more on the statement, economic forecasts and particularly the Fed Funds end of year forecast aka the Dot Plot.

The Fed’s party line for this year has been for three hikes but an increase today would open the door to four at a gradual quarterly pace. If the Fed stays at three, it would suggest they acted now to give themselves some flexibility in case the debt ceiling or some other issue causes disruptions later in the year. It appears the Fed may be becoming more proactive after stalling its way into a corner in both 2015 and 2016.

Today’s US data shows inflation pressures continuing to build keeping the pressure on the Fed to raise interest rates several times this year. Retail sales and Empire Manufacturing were mixed but not disappointing enough to undermine the hawkish case.

The big event for trading in Canada today is the release of US DOE inventories at 1030 am EDT. Yesterday the TSX underperformed its US peers due to a 10% plunge in Valeant Pharmaceuticals and another big drop in energy stocks as the oil price collapse continued. After the exchanges closed, however, WTI rebounded as API reported a 0.5mmbbl drop in US oil inventories. WTI is now up 1.9% overnight heading into the DOE report where the street has been looking for a 3.2 mmbbl increase. This news could keep oil and energy stocks active through the day.

In Europe, the focus today is on the Netherlands election, where the Liberals are widely expected to win. The Euroskeptic Freedom Party (PVV) is running in second and may be picking up momentum following a diplomatic incident with Turkey over the weekend. A win by pro-Euro forces in a core EU country could help to maintain the status quo and deal a setback (but not a defeat)‎ to the forces of change. On the other hand, if Wilders were to win it would be seen as a big defeat for the pro-EU side and could pressure the Euro.

In the UK today, Brexit and employment are in focus. UK jobless claims fell more than expected and the unemployment rate was better than expected but these positives were offset by lower than expected wage inflation. Meanwhile, despite calls for a second referendum from the SNP, a poll shows support for the Union rising not falling as Brexit approaches.

The potential for big news continues with more central banks meeting tomorrow including the Bank of Japan, Bank of England, Norges Bank, and Swiss National Bank. The US preliminary budget request is expected later this week. Plus we could see more talk on trade Friday with G20 finance ministers meeting in Germany and Chancellor Merkel meeting ‎President Trump in Washington.

Chart Signals: Oil bounces back as indices send mixed signals

Crude oil continues its big rebound climbing up out of a positive reversal yesterday. Sterling also appears to be on the rebound. Major indices, meanwhile appear to be moving into sideways consolidation ranges as uptrends fade but with little signs of downward pressure either.

North American and European Indices

US 30 is holding steady near 20,875 above 20,800 support. Still, it hasn’t made any effort at retaking an uptrend line that recently failed indicating that the index has downshifted into a sideways trend with a correction still possible.

US SPX 500 is still trending sideways near 2,370 below 2,400 resistance and above 2,350 support while it digests the gains of previous weeks. RSI drifting indicates upward momentum downshifting into neutral.

US NDAQ 100 is still struggling with 5,395 resistance with a negative RSI divergence indicating upward momentum fading and a correction possible. On the other hand higher lows indicate continued accumulation. Initial support appears near 5,355 with initial measured resistance on a breakout possible near 5,435.

UK 100 is sending mixed signals but a double top forming near 7,400 but a trend of higher lows above 7,330 indicating continued accumulation and an ascending triangle forming. Meanwhile a symmetrical triangle in the RSI suggests a period of consolidation underway.

Germany 30 is still hanging around 12,000 trading up toward 12,030 then backsliding toward 11,980. RSI has flattened out indicating a pause underway within an ongoing uptrend. More support in place near 11,920 with more resistance possible near 12,065.

Commodities

Gold continues to stabilize near $1,200 trading between $1,190 and $1,210. RSI stabilizing near 40 suggests the recent correction has likely run its course. Next resistance on a bounce possible near $1,212 then $1,218 with next support on a downturn possible near $1,184.

Crude Oil WTI continues to climb up out of yesterday’s big bear trap reversal and hammer candle. RSI remains oversold so there is room for a trading bounce. The price has regained its 200-day average near $48.30 with resistance near $48.85 then $49.35 having bounced up off of $47.00.

FX

US Dollar Index is trading near 101.50 within a 100.40 to 102.20 range with initial support near 101.20 and initial resistance near 101.80.

USDJPY is trading near 114.755 still below 115.00 which has become lower resistance down from 115.50. Initial support appears near 114.55 then 114.05.

EURUSD is trading just below its 50-day average near $1.0640 near the middle of a $1.0500 to $1.0720 trading range. RSI sitting on 50 indicates sideways momentum that could break either way. Next resistance near $1.0660 with next support near $1.0600.

EURGBP successfully tested 0.8660 keeping its underlying uptrend intact for now and has bounced back up toward 0.8720 but still faces significant resistance near 0.8800 as a sideways channel emerges.

GBPUSD is still rebounding, trading up into the $1.2180 to $1.2240 area from $1.2120 support as it continues to carve out the right shoulder of a head and shoulders base. RSI indicates downward pressure easing. Next resistance near $1.2255 then $1.2300.

USDCAD is sending mixed signals. The pair is trading near $1.3460 below $1.3500 round number resistance. RSI back under 70 and falling suggests upward momentum fading, but a symmetrical triangle in the pair suggests consolidation within an ongoing uptrend. Next support possible in the $1.3400 to $1.3420 area.

CADUSD continues to attract support above $0.7410 trading near $0.7425. RSI back above 30 indicates downward pressure earing but it needs to clear $0.7440 to break a trend of lower highs and $0.7500 to signal the start of a new uptrend.

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