The US Dollar stabilised at lower levels overnight, consolidating its late afternoon plunge which in turn ignited major rallies for other currencies. President Trump indicated he thinks the US Dollar is getting too strong, that he likes and respects Fed Chair Yellen, that he hasn’t decided whether to give her another term or not and that he likes lower interest rates. This represents a big about face from his campaign comment where he accused Fed Chair Yellen of keeping rates artificially low, indicated he would get replace her at the end of her term.
Anticipation President Trump’s policies would be inflationary and pressure the Fed to act more hawkishly going forward sparked a huge rally in the US Dollar after the election. The Trump trade has already been unravelling between difficulties getting his agenda through Congress and foreign distractions, and these statements further suggest that the reality of governing is catching up with campaign rhetoric.
The Japanese Yen and gold have continued to climb overnight while stocks have been sliding, indicating that capital continues to flow from risk markets to defensive havens ahead of the 3-4 day Easter holiday weekend. AUD has been the strongest performer, rallying on a huge 60K increase in Australia jobs reported overnight, regaining $0.7500 and pulling NZD back above $0.7000. CAD has also continued to strengthen despite a decline in WTI crude oil which is digesting the gains of recent weeks.
Even though exchanges are closed after today, there are a number of significant reports due before exchanges reopen on Monday which could impact forex and futures trading. Friday morning, US retail sales and consumer prices are out while Sunday night, China GDP, retail sales and industrial production could provide an active kickoff to next week as Asia Pacific trading resumes.
Chart Signals: SPX breaks down as indices come under pressure while currencies consolidate rallies
Indices are showing more signs of rolling over and distribution with the US SPX 500 completing a descending triangle with a breakdown. Other major indices are also looking technically vulnerable. Currency markets have been holding on to the big gains and breakouts made late yesterday confirming that a significant shift in money flow is underway. CAD has been particularly strong not just pausing but building on gains.
North American and European Indices
US 30 keeps drifting downward, dropping into the 20,530 to 20,600 range having broken its 50-day average near 20,665. RSI under 50 and falling confirms downward pressure increasing. Next potential support near 20,380 then 20,300 a 23% retracement of the post-election advance.
US SPX 500 is breaking down today, falling under a trend support line near 2,345 to resolve a symmetrical triangle to the downside. RSI under 50 and trending lower confirms downward momentum accelerating. Next potential support near 2,335 then 2,313 a 23% retracement of the previous uptrend.
UK 100 continues to form a head and shoulders top, falling away from shoulder resistance near 7,400 back into the 7,300 to 7,350 area around its 50-day average. Neckline support in place near 7,260.
Germany 30 is still sliding with 12,165 a former support level, emerging as new lower resistance while the index declines toward 12,115. The index remains in an uptrend above its 50-day average near the 12,000 round number and its 50-day average. RSI testing 50 where a break would signal a downturn in momentum. Next potential support near 11,860 a recent low.
Gold has paused in the $1,285 to $1,290 area continuing to attract support as it digest this week’s big breakout rally and work off an overbought RSI. Next support possible near the $1,300 round number with next support in a correction possible near $1,272.
Crude Oil WTI is consolidating recent gains and working off an overbought RSI near $53.00 having encountered resistance near $53.50. Initial support in a pullback possible near $52.70 then $52.40 and $52.00. Next upside tests near $54.00 then $54.45 the top of the broader sideways channel.
US Dollar Index held 100.00 round number support bouncing back up toward 100.30 but it still looks troubled with the RSI still under 50 and a bearish Evening Star still in place. Next resistance possible near 100.60 with next potential support near 99.75.
EURUSD’s latest rally attempt fizzled out near $1.0675 another lower high. RSI failing to retake 50 and turning downward confirms its broader downtrend remains intact. Next potential support appears near $1.0600 then $1.0585 a Fibonacci test and recent low.
EURGBP continues to trend downward with resistance falling toward the 0.8500 round number while the pair declines toward 0.8480 with next potential support near 0.8460 a Fibonacci level then the February low near 0.8400. RSI confirms continuing distribution.
GBPUSD has paused for a rest near $1.2540 having met some resistance near $1.2570 with more possible near $1.2600, while attracting support well above the $1.2500 round number it recently regained.
USDCAD fell through a channel bottom and broke under its 50-day average near $1.3280 and today the pair has confirmed the start of a new downleg, falling toward $1.3230 to test its 200-day average. RSI under 50 and falling indicates downward pressure increasing. Next potential support near !.3200 then $1.3160.
CADUSD continues its breakout rally up off of $0.7500 advancing into the $0.7550 to $0.7570 area between a Fibonacci level and its 200-day average. RSI above 50 and rising indicates upward momentum still increasing. Next potential resistance near $0.7585 then $0.7630.