This article was last updated on April 16, 2022
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Market Insights
Gong Hei Fat Choi!
Trading was light in Asia Pacific markets with the Lunar New Year holiday and festival getting underway. The Nikkei gained 0.3% while China markets were fully or practically closed. Trading in Europe and North America has been subdued so far as well with the FTSE up slightly, the Dax down 0.4% and US index futures all pretty much flat. Currency trading has also been relatively quiet with the USD posting rebound gains against other majors and gold.
This could be seen as the calm before the storm, however, as there is still the potential for significant markets action in North America today, so don’t get lulled into complacency. US GDP and durable goods orders may give an idea of the state of the US economy and how much pressure the Fed is under to raise interest rates again this year ahead of next week’s FOMC meeting.
There is also likely to be a lot of attention on individual stocks today, particularly in the technology sector. Last night, Microsoft and Intel beat the street on earnings and/or guidance while Google fell short. In line reports from Starbucks and PayPal have also been treated as disappointments indicating that the big markets rallies of late have priced in very high expectations.
Trade talks may also attract attention today. US President Trump and UK PM May are set for a meeting today to talk potential post-Brexit trade relations. It also looks like the US is preparing to pursue a course of one on one trade deals with other countries to replace the terminated Trans Pacific Partnership with reports suggesting Japan could be the first candidate with the potential for initial discussions with PM Abe as early as their planned meeting next month.
Commodity markets are in retreat today with WTI crude down 0.75%, Brent crude down 1.1% and natural gas down 2.9%. Rising gasoline inventories have been getting the blame for today’s takedown which seems dubious considering that gasoline itself is only down 0.5%, go figure. We could see some attention around this afternoon’s US Baker Hughes drill rig count with the impact of higher oil prices and increasing US exploration potentially boosting US supply likely to overhang energy prices moving forward.
Chart Signals
Chart Signals: Technical signs of topping in indices emerge
There has been a lot of attention paid to big rallies and new highs for indices this week most notably Dow 20,000 As the week has progressed a number of signs have emerged suggesting that indices may be peaking for now and vulnerable to corrections. Bearish candle patterns like shooting stars and evening stars have emerged along with negative RSI divergences and overbought conditions on the momentum side.
North American and European Indices
US 30 continues to bump up against emerging resistance near 20,140 with upside measured tests possible near 20,150 then 20,300. A lower high in the RSI and negative divergence indicates upward momentum slowing. Initial downside support possible near 20,110 then the 20,000 round number and breakout point.
US SPX 500 is starting to struggle with resistance near 2,302 but is holding near 2,300 with initial support near 2,296. RSI levelling off below 70 is a negative divergence and may be forming the right shoulder of a bearish head and shoulders top in momentum. Initial correction support near 2,282 the recent breakout point.
US NDAQ 100 is holding steady near 5,160 below 5,175 resistance and above 5,150 support but looks vulnerable technically. Thursday’s fall back from early strength created a bearish shooting star candle and a decline today could form a bearish evening star pattern. Plus RSI overbought and levelling off suggests upward may be peaking and the potential for a correction growing. Next potential support near 5,100 then 5,065 and 5,000.
UK 100 remains stuck below 7,200 trading between there and 7,100 most recently between 7,155 and 7,175. RSI testing 50 which could end by confirming the underlying uptrend or signalling the start of a new downtrend. Next upside resistance outside the channel appears near 7,260 with next potential downside support in the 7,000 to 7,025 area where a round number, 38% Fibonacci retracement and the 50-day average cluster.
Germany 30 is showing signs of peaking. The index touched a new high on trend Thursday but fell back by the end of the day creating a bearish shooting star candle that coincided with a negative RSI divergence indicating upward momentum may have peaked. Having met resistance near 11,900 the index has dropped back into the 11,810 to 11,850 range with next potential support at the 11,700 breakout point.
Commodities
Gold remains under distribution, falling away from $1,200 into the $1,182 to $1,186 range with resistance falling toward $1,109 and next support possible in the $1,172 to $1,175 area near the 50-day average and a Fibonacci test. RSI breaking under 50 signals momentum turning downward.
Crude Oil WTI met some resistance near $53.35 and has dropped back toward the $52.60 to $52.80 area but it remains under accumulation in an uptrend of higher lows within a broader $50.40 to $54.20 trading range.
FX
US Dollar Index is building on a successful test of 100.00 round number support and a bullish engulfing day by advancing into the 100.50 to 100.70 area with next potential resistance near 100.80 then 101.30. RSI holding 40 indicates recent downdraft over and underlying uptrend intact. It needs to retake 50 to confirm an upturn in momentum.
USDJPY continues to climb toward the top of a 112.25 to 115.50 trading range, regaining the 115.00 round number. RSI retaking 50 signals momentum turning back upward. Next potential resistance on a breakout possible near 116.80.
EURUSD is still rolling over with resistance dropping back toward $1.0700 and the pair sliding toward $1.0660 a Fibonacci test with its next potential test after that near $1.0565 and the 50-day average. RSI rolling over indicates recent uptrend peaking and a downturn pending.
EURGBP continues to attract support above 0.8460 a Fibonacci level and the midpoint of a 0.8260 to 0.8660 trading range. RSI holding 40 and the pair regaining 0.8500 indicates underlying uptrend intact for now. Next potential resistance near 0.8535 then 0.8575.
GBPUSD appears to be in consolidating mode today trading between $1.2520 and $1.2570 still struggling with resistance near $1.2685 a 23% Fibonacci retracement and 60 on the RSI while holding the $1.2500 round number with next support at the 50-day average near $1.2400.
USDCAD continues to trend sideways in a wide $1.2975 to $1.3565 Fibonacci channel. RSI indicates a recent downswing has bottomed ad a bounce starting with the pair trading in the $1.3100 to $1.3130 area near its 200-day average. Next potential resistance appears near $1.3190 then $1.3300.
CADUSD is sitting on its 200-day average near $0.7625. A recent upswing peaked near $0.7670 while the pair continues to attract support above $0.7550 for now.
USDMXN remains volatile and vulnerable to swings in sentiment swinging back and forth between 20.90 its 50-day average and 21.32 with next resistance near 21.50 and next support near 20.78 a Fibonacci level then 20.56.
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