Oil surges on OPEC speculation, USD drops as Trump takes his show on the road

Stock markets around the world have continued to stabilize overnight. The Nikkei and US index futures are up 0.2% while the FTSE is up 0.5% and the Dax is up 0.3%. Traders should not get complacent and take this as a sign of happy days returning. US indices remain well below where they were before Wednesday’s selloff, and there is a lot happening in other markets.

Crude oil is rallying again today. Both WTI and Brent are up over 1%, challenging $50.00 and $53.00 respectively on speculation of more market support at next week’s OPEC meeting. A six month extension to current cuts had been the baseline of expectations. This week several countries have indicated support for an extension of nine months or more. Overnight reports suggest an OPEC comittee is also looking at deeper supply cuts to shore up the market and reduce the inventory overhang.

In currency markets, the big story today is that the US Dollar has turned south again, falling against gold, EUR, JPY and other majors. GBP has regained $1.3000.‎ Even CAD, which has been struggling all week is gaining on the greenback today.

This is important because earlier in the week, a selloff in the US Dollar preceded the plunge in stocks. This bearishness comes with President Trump looking to change the topic ‎as he goes out on the road to Saudi Arabia, Israel, Italy (twice) and Belgium.

On top of potentially having to deal with his troubles at home from a distance, he faces potential challenges on this trip as well. In the Middle East he may try to get the peace process going again while explaining why he gave Israeli intelligence to Russia. In Europe, he may try to get higher spending commitments out of NATO allies. At the G7 summit trade is likely to top the agenda, especially after finance ministers failed to agree on anything.

Canadian markets could be active today. The oil rally could boost interest in energy stocks. The loonie had been under pressure on uncertainty over the upcoming NAFTA renegotiation. With the White House sending a letter to Congress yesterday to start a 3 month review before talks can start in August (just ahead of the big US budget battle) the loonie has bounced back. Bombardier could be active with aerospace becoming the latest dispute area with the US accusing the company of dumping CSeries jets and Canada threatening to retaliate by stopping negotiations to purchase military jets from the US. Inflation and retail sales numbers may keep Canada in focus ahead of the Victoria Day long weekend.

Chart Signals: EUR, GBP and CAD rally as USD breaks down again

There are a lot of big moves in currency markets today. The US Dollar Index is breaking down while EUR and GBP are breaking out. CAD is testing key support/resistance and appears poised to break out from a base as well. Oil is also climbing today with WTI testing $50.00.

North American and European Indices

US 30’s recent rebound has been contained by its 50-day average near 20,745 also a lower high. The index has stabilized near 20,690 for now with downside tests possible near 20,505 then 20,270 a 23% retracement of the post-election uptrend. 

US SPX 500 has levelled off near 2,370 its 50-day average. The index is up from a recent low near 2,345 but way short of 2,380 and 2,400 resistance. Next support possible near 2,325. RSI still under 50 indicates ongoing distribution. 

US NDAQ 100’s rebound attempt has turned out to be pretty feeble stalling out near 5,635 a Fibonacci level as resistance falls there from 5,725. RSI held 50 for now but indicates upward momentum has been broken. Next support near 5,580 then 5,545 in a downturn. 

UK 100 is steady just above 7,450 with its recent breakout point becoming support, but encountering resistance near 7,500 with more possible near 7,535. A top could be forming with RSI back under 70 indicating a pause or correction underway. Next pullback support possible near 7,390.

Germany 30’s bounce has levelled off in the 12,600 to 12,640 area way below 12,800 where its recent selloff started. RSI holding 50 keeps its underlying uptrend intact for now, but a downturn pending. Next downside support possible near 12,480 the recent low then 12,305 the 50-day average.

Commodities

Gold has regained $1,250 and is sitting just above its 50 and 200-day averages which just completed a Golden Cross near $1,247. RSI holding 50 confirms an upswing in momentum underway. Next potential resistance in the $1.265-$1,270 zone.

WTI continues to climb, clearing $49.50 to confirm it has retaken its moving averages and signal an upturn, and then challenging $50.00 with next resistance on trend possible near $51.00. RSI above 50 and rising signals increasing upward momentum.

FX

US Dollar Index breaking down again, taking out 97.30 to signal the start of a new downleg. Resistance drops toward 97.75 from 98.00. Next downside support possible in the 96.70-96.80 area then 96.20 based on measured moves.

USDJPY has paused between 111.20 and 111.70 near its 50-day average. A 110.65 to 112.15 Fibonacci trading range appears to be emerging for digesting the recent plunge down from 114.55. RSI holding below 50 following a breakdown confirms momentum has turned downward.

EURUSD is breaking out again today, clearing $1.1160 to signal the start of a new upleg while support rises toward $1.1100. Next potential resistance near $1.1200 then $1.1295 its November election night peak.

EURGBP remains in a upswing with the RSI steady above 50 and support rising from 0.8530 toward 0.8575. Next potential resistance in the 0.8600 to 0.8625 zone followed by 0.8700. 

GBPUSD is breaking out today over $1.3000 signalling the start of a new upleg with next potential resistance near $1.3050 then $1.3155 a Fibonacci level. RSI indicates upward momemtum accelerating. Support rises toward $1.2940 from $1.2900. A recent golden cross of the averages confirms underlying accumulation.

USDCAD is testing $1.3570 a Fibonacci level where a breakdown would complete a bearish descending triangle. RSI has already broken under 50 to signal a downturn in momentum. Next potential support on a breakdown near $1.3500 a round number near the 50-day average.

CADUSD continues to form a saucer bottom between $0.7270 and $0.7380 recently advancing on $0.7370. RSI regaining 50 signals momentum turning back upward. Next potential resistance on a breakout possible near $0.7410 a Fibonacci level. 

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