CAD and MXN in focus as mixed markets await today’s big Trump speech

This article was last updated on April 16, 2022

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Market Insights

The big day everyone has been eagerly awaiting (or dreading) for over two months since the US election is finally here. Today Donald Trump is to be sworn in as US President and to give a speech outlining his vision for the country. There will also be other festivities and protests running into the weekend.

The official start to the Trump Administration brings some trepidation to the markets. The big post-election rally priced in huge expectations that his policies would benefit the US economy with little blowback or oppo‎sition. Today and Monday, his first full weekday in the Oval Office, the rubber hits the road.

Today’s inaugural address may give traders a better idea of what measures he is planning to fix the economy (changes to trade, infrastructure, regulations, taxation and heath care were widely discussed in the campaign), and where the economy sits on his list of priorities. It’s important for traders to note that along with new initiatives, he’s going to need to spend time cleaning up the messes that President Obama has left behind. In addition to the speech, incoming President Trump is expected to issue a number of executive orders related to deregulation, and potentially building a wall on the Mexican border.

So far this morning, US index futures, the FTSE and the Dax are all up slightly 0.0% to 0.2%. Overnight IBM beat the street on earnings and guidance but there was little impact indicating strong results have already been priced in, shifting the balance of surprises to the downside.

Gold is flat while USD is up slightly against other major currencies. Fed Chair Yellen indicated more rate hikes are likely, but she also noted the US isn’t overheating so she probably won’t be as aggressively hawkish as the street is thinking. Earlier in the week she hinted toward 2 rate hikes, the Fed party line is 3 and the street has priced 4-5 into the US Dollar.

GBP has dropped back moderately on lower than expected but still pretty good UK retail sales report. (there are a LOT of countries that would love to post 4%+ retail sales).

Despite a ‎1.1% gain in the WTI oil price overnight. The Canadian Dollar remains under pressure and could be active through the day. Canada inflation and retail sales reports are due but are likely to be overshadowed by events south of the border. With the US looking to reopen NAFTA and bring in other trade measures, even though Canada is unlikely to be targeted directly, we could get caught in the crossfire of trade wars. Because of this risk, the Bank of Canada moved dovish this week indicating it stands ready to cut interest rates if needed to mitigate any impact of changing trade. Any comments or actions from Trump on trade today could have a big impact on both CAD and the Mexican Peso (MXN).

The banking situation in China may also impact trading in the coming days. Overnight, China GDP came in at 6.8% just above expectations. Meanwhile, the PBOC has been rushing to shore up the country’s banking system ahead of next weekend’s Lunar New Year holiday. In addition to pumping in record amounts of liquidity, the PBOC cut the reserve requirements for major banks freeing up capital form them to put into the system as well. The Hang Seng fell while mainland markets rose, but this China could become a bigger issue next week particularly if the US starts taking action against it over trade or currency issues.

Chart Signals

Chart Signals: CAD and MXN in focus for Trump trading

Most markets have been relatively quiet overnight, consolidating near technical support/resistance points, moving averages or Fibonacci levels. It remains to be seen if they are pausing to digest this week’s big moves or coiling up like a spring ready for potential action later today around Donald Trump’s comments and/or executive orders. CAD and MXN the currencies of the Americans NAFTA partners could be particularly active today around trade comments or actions (or inactions, these currencies have already been pushed down on anticipation Trump could get tough on trade)

North American and European Indices

US 30 successfully tested the bottom of its current 19,700 to 20,000 trading range and held 50 on the RSI keeping its underlying uptrend intact for now. The index has bounced up into the 19,750 to 19,780 area. It needs to retake 19,840 to call off a trend of lower highs.

US SPX 500 is holding steady near 2,270 still stuck below 2,282 resistance. Signals are mixed with a head and shoulders top in the RSI suggesting distribution while higher lows for the index indicate accumulation. Next potential support near 2,252. 

US NDAQ 100 is still struggling with resistance near 5,075 but remains in an uptrend continuing to attract support well above its 5,000 round number breakout point. Next potential resistance in the 5,140 to 5,150 area.

UK 100 has paused for a rest and to digest recent swings near 7,200 a 23% Fibonacci retracement of its previous advance. Upside resistance appears near 7,265 then 7,325 with next support possible near 7,090.

Germany 30 is still stuck in a trading range between 11,445 and 11,700 recently trading in the 11,580 to 11,630 area. RSI suggests current consolidation easing overbought conditions.

Commodities

Gold continues to bounce around the $1,200 round number trading between $1,196 and $1,206 with next resistance near $1,218. RSI indicates overbought conditions easing and that underlying accumulation remains intact through the current consolidation phase. 

Crude Oil WTI is still bouncing around within a $50.40 to $54.20 trading range, recently climbing form near $51.40 towards $52.10 with next resistance near $52.80. RSI holding 50 suggests recent trading represents a consolidation phase within an ongoing uptrend.

FX

US Dollar Index is holding steady near 101.3440 within a 100.30 to 101.60 trading range. RSI steady between 40 and 50 indicates neutral to slightly downward momentum.

USDJPY has levelled off in a range between 114.05 and 115.50 both Fibonacci levels. The pair has climbed into the 115.10 to 115.40 area near its 50-day average from 114.60. RSI remains below 50 indicating broader downward momentum remains intact through the current upward correction. Next upside resistance near 117.00 with next downside support near 112.35.

EURUSD continues to drift back amid signs its recent uptrend may be shifting into neutral. The pair is trading just below $1.0655 as a $1.0585 to $1.0720 trading range emerges. All three are Fibonacci levels. Meanwhile RSI steady just above 50 indicates a pause within an uptrend underway.

EURGBP is holding steady near 0.8660 a Fibonacci level trading between 0.8630 and 0.8700. RSI holding 50 suggests recent trading has been a correction within an uptrend, a break of that level would be needed to signal otherwise. Next support possible near 0.8520 and the 50-day average with next resistance near 0.8775.

GBPUSD appears to be settling into a $1.2200 to $1.2400 trading range below its 50-day average where it has started to digest recent action and base build following the completion of a big double bottom with a successful $1.2000 retest. RSI sitting on 50 confirms momentum turning sideways for now. Recent trading between $1.2260 and $1.2300. Next potential resistance on a breakout in the $1.2500 to $1.2525 area.

USDCAD continues to rally, driving up off $1.3300 to confirm a breakout over that Fibonacci level, into the $1.3360 to $1.3380 area near its 50-day average. Next potential upside resistance near $1.3455 then $1.3500. RSI breaking out over 50 confirms momentum turning upward.

CADUSD is breaking down today, taking out the $0.7500 round number, its 50-day average and 50 on the RSI all signalling the start of a new downleg. The pair has dropped toward $0.7480 from $0.7520 with next potential support near $0.7450 then $0.7410.

USDMXN remains in an uptrend currently bumping up against the top of a 21.40 to 22.00 trading range, holding above a recent breakout point while digesting recent gains. Next potential resistance on a breakout appears in the 22.60 to 22.80 area based on measured moves.  Next support near 20.85 and the 50-day average.