Markets active on earnings and GDP reports with CAD impacted by NAFTA posturing

Indices are holding steady this morning amid a flood of earnings and economic news. US index futures and the Dax are flat, while the FTSE is down marginally.

NASDAQ futures had popped late yesterday on strong earnings from Amazon.com and Alphabet (Google) but that was whittled away overnight.

Today brings earnings reports from Big Oil in the US, Exxon Mobil and Chevron. It will be interesting to see if US companies results are as strong as the numbers posted by Suncor Energy and Total earlier on. Big numbers are out this morning from General Motors and Thomson Reuters

One theme running through today is likely to be whether markets are still prepared to respond to good news. In the US this week, selected stocks have responded positively to good news but index action has been mixed with the NASDAQ breaking out to a new high but the Dow and S&P forming double tops. This is a concern because technology is a late stage sector. If all the good news out overnight (Microsoft and intel’s reports were also positive) ‎ isn’t enough to push US indices to new highs today, it could be a sign the seasonal rally has become exhausted.

Currency markets, meanwhile have been responding to economic news. A day after ECB President Draghi indicated no plans to taper further unless inflation picks up, Eurozone CPI took off, sparking a rally in the Euro. ‎Meanwhile, an increase in UK GDP has Sterling climbing as well. RUB is falling after the Bank of Russia announced a 0.25% interest rate cut. JPY is steady after strong retail sales and housing starts were offset by soft industrial production. 

CAD, on the other hand, is under pressure again. Comments from President Trump overnight included talk that he plans to Fund US tax cuts through better trade deals, indicating he plans to take a tough stance at upcoming NAFTA talks. He also left the door open to walking away from NAFTA if he doesn’t get the deal he wants. Trump will be under pressure to deliver on something with his other big policy planks struggling to get through Congress.

GDP reports for the US and Canada may also potentially move the markets today. In addition to the headline number, inflation measures could attract attention from traders speculating on what could come out of next week’s FOMC meeting. As the day progresses, we could see positioning ahead of the weekend EU summit on Brexit.

Chart Signals: GBP, EUR and Oil rally while indices look exhausted and vulnerable

There have been a number of significant swings this morning. GBP is rallying and breaking out, while EUR is rallying but failing to break out. Both face round number resistance near $1.3000 for Cable and $1.1000 for Euro/Dollar. WTI crude oil looks like it may have bottomed for now with a rally building on a hammer candle. Meanwhile, indices are looking increasingly exhausted with the US 30 and US SPX 500 forming double tops and the UK 100 confirming a head and shoulders top.

North American and European Indices

US 30 appears to have completed a double top near 21,130 with the index drifting back under 21,000 and on toward 20,975. RSI indicates upward momentum stalling and a downtrend potentially emerging. Next support possible near 20,930, 20,800, and the 50-day average near 20,760.

US SPX 500 is still stuck below 2,400 resistance and appears to have completed a double top. The pair has dropped back toward 2,390 with next support near 2,370 then the 50-day average near 2,364. RSI indicates upward momentum slowing and a correction possible.

US NDAQ 100 has encountered measured resistance near 5,600 with a late afternoon pop up from 5,560 stalling out near 5,590. An overbought RSI suggests potential for a pause or correction. Initial pullback support possible near 5,535 then the 5,480-5,500 area.

UK 100 has resumed its downtrend with a head and shoulders top back on as resistance falls toward the 7,260 neckline and the index drops toward 7,210 with next potential support near 7,190 then 7,100. RSI falling away from 50 confirms increasing downward momentum.

Germany 30 still appears to be forming a top with a descending triangle forming between 12,520 resistance and 12,380 breakout point support with the index trading recently near 12,440. RSI rolling over and a negative RSI divergence indicate upward momentum weakening.

Commodities

Gold is still bouncing around between $1,260 and $1,270. RSI holding above 50 and the price holding above its 50 and 200-day averages in the $1,200 to $1,255 zone with a golden cross pending indicates a pause following a correction within a larger uptrend. Next resistance possible near $1,280. 

Crude Oil WTI appears to be turning back upward, following a hammer candle and bullish bear trap reversal up off of $48.00 with an advance from $48.80 toward $49.30. RSI confirms downward pressure starting to ease. Next resistance near $50.00 then the 50-day average near $50.70.

FX

US Dollar Index is still bouncing around between 98.60 and 99.20. With rebounds being contained by the bottom of a breakaway gap and RSI under 50 and trending lower this looks like a pause within an ongoing downtrend. Next potential support near a measured 98.00. 

USDJPY continues to rally up out of a rounded bottom that could become a head and shoulders base. Support has moved up toward 111.00 from 110.65 with the pair advancing on 111.45. Next potential resistance near 111.85 the 50-day average then 112.15.

EURUSD has regained $1.0900 but continues to struggle with the top end of a 1.0850 to $1.0950 trading range. RSI near overbought and levelling off suggests advance may be getting technically tired. Next upside resistance at the $1.1000 round number with next support at the 200-day average near $1.0830.

EURGBP is retesting 0.8460 as resistance down from 0.8500 but has been unable to get through, which, along with the RSI unable to retake 50, keeps its broader downtrend intact. Next potential support near 0.8400 then 0.8345.

GBPUSD is breaking out today, clearing its previous intraday high near $1.2900 to signal the start of a new upleg on trend. The pair has advanced on $1.2940 with next potential resistance at the $1.3000 round number. RSI overbought but confirms upward momentum still increasing.

USDCAD has paused its advance in the $1.3625 to $1.3670 area to digest recent gains and an overbought RSI. It remains in an uptrend above its recent $1.3600 breakout point and $1.3570. Next potential resistance near $1.3830 a Fibonacci test.

CADUSD keeps drifting downward despite oil gains and an oversold RSI. The pair has dropped into the $0.7315 to $0.7340 area with next potential support near $0.7270 and initial resistance near $0.7380, both Fibonacci levels.

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