US returns with a rally on retailer earnings

This article was last updated on April 16, 2022

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North American traders appear to be returning from a long weekend in a good mood with both US stocks and USD in rally mode. US index futures are up 0.25% so far with the FTSE flat and the Dax up 0.5%. Positive flash manufacturing reports for France and Germany overnight have boosted continental stocks a bit.

US traders appear to be responding favourably to the first retailer earning which has seen Home Depot come in very strong, beating the street by a wide margin and announcing an eye catching 29% dividend increase. ‎Wal-Mart beat the street by a smaller margin and announced a more modest 2% dividend increase. Struggling Macy’s is scheduled to report later this morning. Kraft Heinz may also be active again as its plan to bid for Unilever collapsed over the weekend.

Resource stocks particularly energy companies and base metal miners, may also attract attention from traders with commodity prices rallying today. WTI crude oil and copper are both up 1.5%‎ today.

Gold stocks, on the other hand, could struggle today with the yellow metal down 0.6% and Silver down 0.8%. The USD is outperforming ahead of today’s Fed member speeches with Philadelphia Fed President Harker having suggested over the weekend the potential for a rate hike in March. GBP is down against USD but up against EUR and JPY as the House of Lords continues debate on the Brexit bill.

Chart Signals: Big Breakouts for WTI Crude Oil and the US Dollar Index

The biggest technical action today so far is in WTI Crude Oil which has broken out to a new high on trend and completed a consolidation phase that included the formation of a bullish ascending triangle. The US Dollar is also breaking out putting pressure on gold and paper currencies with EUR looking the most vulnerable technically.  Today’s other big test is in the Germany 30 which could end in a double top or a breakout.

North American and European Indices

US 30 is digesting recent gains trading between 20,630 and 20,660 with next potential resistance near 20,690 then 20,750. RSI remains overbought so a correction remains possible with initial support possible near 20,500.

US SPX 500 has paused near 2,350 trading between 2,335 and 2,360 while working off an overbought RSI. Next potential support near 2,322. 

US NDAQ 100 has encountered some resistance near 5,345 and has slipped back toward 5,335 with next potential support near 5,285. RSI remains really overbought and levelling off suggests upward momentum pausing and a correction possible.

UK 100 is still hanging around 7,300 having dropped back from 7,325 while holding above 7,255. RSI falling back from 70 indicates momentum downshifting from upward to neutral. 

Germany 30 is bumping up against 11,900 which could end in a double top or a big breakout. Rising RSI signals increasing upward momentum. Next potential upside resistance near 12,000 then a measured 12,350. Initial support near 11,775 then 11,700.

Commodities

Gold is starting to roll over, falling from near $1,239 toward $1,230 and a retest of Fibonacci support following completion of a small double top near $1.245 last week. RSI falling toward 50 indicates upward momentum fading and a downturn possible.

Crude Oil WTI has a major breakout underway today clearing $53.85 to complete a big bullish ascending triangle pattern. Rising RSI confirms increasing upward momentum. Next potential resistance near the $55.00 round number, which is close to a measured move from the recent $52.65 to $53.85 range as well.

FX

US Dollar Index is breaking out today, clearing 101.00 once again and its 50-day average. RSI rising up off 50 confirms momentum turning upward. Recently trading near 101.55, next potential upside resistance tests appear near 101.70 then 102.50. 

USDJPY has popped up from near 113.00 toward 113.80 but with RSI sitting on 50 this looks like a normal bounce within a broader sideways trend between112.35 and 114.05 for Fibonacci retracement levels.

EURUSD is breaking down today, taking out its 50-day average near $1.0600 then diving down through $1.0585 a Fibonacci level on its way toward $1.0530. RSI falling away from 50 indicates downward momentum increasing. Next potential support near $1.0500 then $1.0470 and $1.0400.

EURGBP has turned downward once again, falling away from its 50-day average near 0.8540 under 0.8500 and on toward 0.8480 with next potential support near 0.8460 where a channel bottom, Fibonacci test and the 200-day average all converge. RSI under 50 and falling indicates increasing downward momentum.

GBPUSD is testing support at its 50-day average near $1.2410 once again. RSI slipping under 50 indicates momentum turning downward. Next potential support near $1.2355. Initial rebound resistance possible near $1.2430 then the $1.2460-$1.2480 area. 

USDCAD is trading near its 200-day average near $1.3140 as it bounces around between $1.3100 and $1.3160. Next resistance near $1.3200 with next potential support near $1.3070. RSI testing 50 but needs to break out to signal a more serious upturn.

CADUSD is starting to break down, breaking uptrend support lines in the pair and the RSI and testing $0.7600 plus its 200-day average. RSI testing 50 where a break would confirm a downturn. Next potential downside tests near $0.7550 then $0.7500.