Mixed markets await France election results and flash PMI

Stock markets around the world‎ have been trading mixed overnight and into this morning amid a number of developments.

The Nikkei soared 1.0% overnight on better than expected Japanese flash manufacturing PMI and comments from President Trump suggesting China was taking steps to deal with the North Korea situation.

Although flash PMI ‎reports for France and Germany were also positive, the Dax is up only 0.1% while the CAC is down 0.5% and the Euro is down slightly. Traders appear wary to take on new positions ahead of Sunday’s first round of Presidential voting.

It has been a close race among four candidates for two spots in the next round. The latest polls suggested Macron was pulling away but that was before ISIS staged a terrorist attack on the Champs-Elysees last night where a police officer was killed. It remains to be seen if this will have any impact. Three of the four candidates have called off events for today with Melenchon continuing, refusing to let the terrorists win. Strong results for Le Pen and-or the surging Melenchon, who are both critical of the EU, could spark volatility when markets reopen Monday, while strong support for Macron and-or Fillon could calm fears of political disruption.

Heightened market volatility is likely over the election period, this could result in widened spreads. We recommend that you monitor positions carefully, consider the use of appropriate risk management tools and maintain a sufficient account surplus throughout this period.

Sterling and the FTSE are down slightly this morning after UK retail sales came in well below expectations. Higher prices apparently dampened sales.

US markets responded favourably to indications that negotiations continue on health care reform and that sweeping tax reforms are apparently on the way, hopefully to be passed by the end of the year. On the other hand, talks to avoid a government shutdown as early as next week appear to be getting bogged down with the President wanting money for the military and a border wall in exchange for continued funding of Obamacare.  Earnings from overnight and this morning have been mixed with Visa, Suntrust Banks, Honeywell and GE all beating the street while toymaker Mattel missed badly again due to an inventory overhang from slow Christmas holiday sales.

Mid-morning brings flash manufacturing and service PMI reports. Following the initial reaction to this and overnight news, traders may spend the day preparing for what could be a big weekend for political developments, particularly in Europe

Chart Signals: Euro slides while indices rebound, France 40 holds 5,000

Major world indices continue to show signs of life, with support coming in and breakouts pending. In particularly, Germany 30 and France 40 appear to be attracting round number support above 12,000 and 5,000 respectively.  Meanwhile, EUR has started to tumble again ahead of the weekend election in France. 

North American and European Indices

US 30 has bounced back up toward 20,600 but it remains in a falling channel of lower highs and lows below 20,710 and its 50-day average. RSI still under 50 indicates continuing distribution but a breakout would signal an upturn. Initial support near 20,580 then 20,380.

US SPX 500 is sitting on downtrend resistance and its 50-day average between 2,355 and 2,360. Higher lows and RSI breaking out over 50 suggest accumulation resuming. Next upside resistance near 2,380 with next support near 2,335.

US NDAQ 100 has paused near 5,455 to digest a rally up off of 5,400 that called off a possible head and shoulders top. RSI above 50 and breaking out of a downtrend indicates renewed accumulation. Next potential resistance near 5,480 where a test could end in a big breakout or a double top. 

UK 100 continues to stabilize in the 7,100 to 7,130 area digesting recent losses including the completion of a head and shoulders top while working off an oversold RSI. Next upside test near 7,200 with next downside support at the 200-day average near 7,015.

Germany 30 continues to attract support above the 12,000 round number and its 50-day average, recently trading between 12,030 and 12,080 with next resistance possible near 12,100 then 12,165. RSI nearing 50 which it needs to retake to confirm an upturn. Next potential support on a failure possible near 11,925.

France 40 remains in an uptrend trading above the 5,000 round number and its 50-day average. It has encountered some resistance near 5,100 with more possible near 5,150. Recent trading has been in the 5,030 to 5,050 area. RSI is mixed, back above 50 but still in a downtrend.

Commodities

Gold remains well supported, consolidating recent gains and working off an overbought RSI trading between $1,275 and $1,300. Recent trading between $1,280 and $1,286.

Crude Oil WTI is still testing $50.00 round number support, which continues to hold. Initial resistance appears at the 50-day average near $51.00 with next potential support near $49.55 then the 200-day average near $48.65. RSI back under 50 signals momentum turning downward.

FX

US Dollar Index is slowly but surely creeping back upward but it needs to retake 100.00 on the index and 50 on the RSI so signal an upswing. Next resistance near 100.30 then 100.65 if successful. If not, next potential support appears near 99.30 then 98.90.

USDJPY continues to trade within a 109.00 to 109.25 Fibonacci cluster just above its 200-day average while digesting recent losses and working off an oversold RSI within a 108.00 to 109.50 range with more resistance possible near 110.00.

EURUSD failed to hold above $1.0720 a Fibonacci level and has started to drift back downward toward $1.0695 with next potential support near $1.0640 where the 50-day average and a Fibonacci level converge. RSI rolling over indicates a downswing starting within a broader sideways trend. Next lower support near $1.0585.

EURGBP is having a third inside day consolidating its recent big plunge down from 0.8510 toward 0.8310. The pair failed to hold a bounce back above 0.8400 and has been trading near 0.8375 recently. Next downside Fibonacci support possible near 0.8260.

GBPUSD has slipped back under $1.2800 toward $1.2760 in what looks like normal backing and filling after a massive spike up from $1.2500 toward $1.2900 earlier this week. The pair remains in an uptrend above its recent $1.2700 Fibonacci test and breakout point.

USDCAD has encountered resistance near $1.3500 but has broken out of a symmetrical triangle and remains in an upswing above $1.3420 with next resistance near $1.3550. RSI above 50 indicates continued underlying accumulation.

CADUSD appears to be stabilizing with support coming in near $0.7410 and more possible near $0.7380 both Fibonacci levels. The pair has been trading near $0.7425 with next potential resistance near $0.7465 and $0.7500. RSI indicates downward pressure easing a bit.

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