Stocks sink as Trump talk turns to trade

This article was last updated on April 16, 2022

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Market Insights

Stock markets around the world have been declining to start the first full week of the Trump Administration as the potential risks to global politics and trade from his policies become more apparent.

Capital is flowing back into defensive havens following weekend developments, with Gold and JPY gaining ground again. ‎GBP is particularly strong outpacing EUR to the upside on the back of a roaring UK economy and the potential for closer ties between the UK and US.  The Nikkei is down 1.2% on the currency rally while The FTSE and Dax are down 0.4%.

US index futures are down 0.2%. In addition to political news, this week is the heart of earnings season with reports due from Boeing, Caterpillar, Google, MicroSoft, Intel and many many other big companies. So far strong reports have met with limited upside response. while profit warnings have been punished severely. This indicates market expectations remain high with strong growth already priced in and the potential for negative surprises higher.

Following on from the America First comments in his inauguration speech, President Trump indicated over the weekend the first world leader he plans to meet in person is UK PM May this Friday. He also plans to meet with Mexico’s President and Canadian PM Trudeau shortly to discuss NAFTA and to pull out of the Trans Pacific Partnership, indicating the first phase of his economic plan is going to be try and change trade relationships. CAD and MXN have bounced back a bit from depressed but that could be short-lived relief, we’ll see.

President Trump also spent time on the weekend bickering with the media and others over the size of the crowd at his inauguration and ‎facing major protests. This reminds the market that there are a lot of potential distractions and opposition which could delay if not block his efforts raising the risks for markets like US stocks and USD that had recently priced Trump to perfection.

‎Commodity markets are mixed today. Metals are climbing with copper up 0.6% and aluminium up 1.0%. Crude oil is taking a hit falling 1.2%. Traders remain concerned about the potential increasing US exploration activity could lead to increased production as Friday’s Baker Hughes drill rig count was a crossover week, the first time in a very long time that the number of active rigs was up over the same week a year ago.  This prospect has overshadowed reports that 80% of promised OPEC production cuts have been implemented, running ahead of schedule and that processes for monitoring and meetings to discuss progress have been set up.

Chart Signals: Big Breakouts for GBP, MXN and CAD rebound

Sterling is in the spotlight today with GBP breaking out against both USD and EUR. On the flip side of that, UK 100 is breaking down. Despite tough talk on trade from Trump, CAD and MXN have started to rebound from depressed levels. Gold and JPY gains indicate some defensive flows.

North American and European Indices

US 30 is rolling over again, sliding back under 19,800 into the lower third of its 19,700 to 20,000 trading channel. Initial downside support possible near 19,760. RSI near 50 indicates momentum has downshifted from upward to sideways.

US SPX 500 is drifting sideways near 2,266 below 2,282 resistance. A head and shoulders top in the RSI indicates the recent uptrend has peaked and a downturn possible. Next potential support tests near 2,252 then the 50-day average near 2,238. 

US NDAQ 100 is hanging around 5,050 within a 5,000 to 5,070 trading range. RSI rolling over indicates upward momentum has peaked and may be starting to fade. Next upside near a measured 5,140 with next support at the 50-day average near 4,900.

UK 100 is breaking down today, taking out 7,200 a Fibonacci level and falling into the 7,150 to 78,180 area with next potential support near 7,100, a 38% retracement of its previous uptrend then the 7,000 round number. RSI testing 50 where a break would confirm a downturn in momentum.

Germany 30 continues to bounce around in a sideways range between 11,455 and 11,700. Today the index successfully retested the 11,500 round number and has bounced up into the 11,580 to 11,600 area. Falling RSI indicates upward momentum still weakening.

Commodities

Gold has climbed back above $1,211 a Fibonacci level and it testing the top of its $1,200 to $1,218 trading channel with next resistance near $1,230 a Fibonacci test then a measured $1,236. RSI holding 60 and rising confirms upward momentum accelerating.

Crude Oil WTI is still stuck between $50.40 and $54.20 with RSI sitting on 50. This indicates the oil market remains in consolidation mode through today’s downdraft that has seen the price fall into the $51.60 to $52.00 range from $52.50. A symmetrical triangle of higher lows and lower highs and RSI holding 50 indicates this as a pause within a larger uptrend rather than a top forming. 

FX

US Dollar Index looks increasingly under distribution with resistance falling toward 100.45, the index near 100.25 and next potential downturn support near the 100.00 round number then 99.70 and 99.35. RSI under 50 and falling indicates downward pressure increasing.

USDJPY remains in a wide 112.35 to 115.50 range where it has been digesting recent declines. Its larger downtrend appears to be resuming with the pair under its 50-day average near 114.75, taking out 114.05 a Fibonacci level and falling into the 113.40 to 113.70 area. RSI faltering short of 50 and falling again confirms downtrend intact and accelerating downward. Next potential support near 111.25, also a Fibonacci level. 

EURUSD is trying to stage a breakout with mixed success trading between $1.0700 and $1.0750 around $1.0720 a 38% Fibonacci retracement of its previous downtrend. Signals are mixed as a failed attempt is contradicted by a rising RSI that signals growing upward momentum. Next potential resistance near $1.0800 with next potential support near $1.0660. 

EURGBP is breaking down today, sliding under 0.8660 a Fibonacci level toward 0.8610 with next potential support at the 50-day average near 0.85340 followed by the 0.8500 round number and 0.8460 a Fibonacci test. RSI testing 50 where a break would signal a downturn in momentum.

GBPUSD is breaking out today! The pair has cleared its 50-day average and a channel top near $1.4210 and retested it as new higher support signalling the start of a new uptrend. Initial resistance has emerged near $1.2470 followed by $1.2500 and $1.2575. RSI rallying up off 50 confirms a breakout and that upward momentum is accelerating.

USDCAD is starting to turn back downward again, having peaked at a lower high near $1.3390, resistance falling toward its 50-day average near $1.3350 and the pair dropping back to $1.3300 a Fibonacci level with next potential support near $1.3270 then $1.3195. RSI peaking near 50 suggests the recent bounce may be over and a new downswing emerging.

CADUSD is on the rebound having completed a bear trap shakeout by regaining its 50-day average and the $0.7500 round number. The pair has advanced into the $0.7510 to $0.7540 with next potential resistance near $0.7550 then $0.7620. RSI stabilizing near 50 indicates an uptrend emerging.

USDMXN continues to fall away from 22.00 taking out 21.40 to call off a recent breakout and retesting that level as new resistance with next support near 21.25 then 21.00 and the 50-day average near 20.85. RSI falling toward 50 confirms upward momentum fading and a downturn pending