Crude Oil drops between inventory reports

Upward momentum in stock markets started out strong overnight but has faded into the morning. The Hang Seng rallied 1.2% while the Nikkei gained 1.0% in Asia Pacific trading. In Europe, the FTSE is up 0.4% while the Dax is up 0.2%. US index futures, however, are down marginally.

The biggest action overnight  ‎has been in crude oil with WTI and Brent falling 0.6% after another huge increase in US API crude oil inventories this time 9.9 mmbbls. The market continues to be caught between falling OPEC production and rising US production with something having to give eventually. Oil could be active again mid-morning around the weekly DOE energy inventory reports.

‎In currency trading, the USD continues to climb but the pace has slowed with the greenback posting moderate gains against other major currencies and gold. The street continues to view Fed Chair Yellen’s testimony as indicating the potential for several rate hikes this year. Today’s US data including inflation, retail sales, Empire manufacturing and industrial is likely to be viewed through the lens of whether it adds to or takes away from the case for a March rate hike. Round two of Dr. Yellen’s testimony goes today plus speeches from regional Fed Presidents Harker and Rosengren.

In other news, the EU Parliament passed the Canada-EU trade agreement (CETA) by a 408-254 margin. On the flip side, Brexit continues to have a positive impact on the UK economy, with this month’s jobless claims falling by a big 42K instead of the 1K increase the street had expected.

Chart Signals: EUR breakdown, Indices look exhausted

The US Dollar rally has put pressure on other currencies but EUR looks to be the weakest technically currently taking out Fibonacci support and bringing $1.0500 into view. GBP is also struggling as it tests its 50-day average. US indices have reached new highs but overbought RSIs and negative divergences suggest potential exhaustion while the Germany 30 may be forming a double top.

North American and European Indices

US 30 has broken out over 20,500 trading up toward 20,540. It’s looking vulnerable to a correction, however with RSI getting overbought again, the index levelling off and a negative RSI divergence indicating upward momentum slowing. Initial support near 20,490 then 20,440.

US SPX 500 continues to climb, touching a new all-time high near 2,340 with next potential measured resistance near 2,350. RSI is getting really overbought so a correction possible with initial support near 2,322 a recent breakout point.

US NDAQ 100 touched a new high overnight near 5,276 but has started to slip back a bit in normal trading. RSI really overbought and levelling off suggests rally may be near an end and a pullback possible. Next potential resistance near 5,300 with initial support possible near 5,230 then 5,200.

UK 100 remains in an upswing trading above 7,300 with next potential resistance near 7,320 then 7,365. Lower highs in the index and the RSI look troubling suggesting fading upward momentum. Next potential support in a pullback near 7,255 then 7,200.

Germany 30 appears to be forming a double top with the index peaking again near 11,850 then sliding back toward 11,785. Lower highs in the RSI indicate upward momentum weakening and distribution starting. Next potential support near 11,675 then the 50-day average near 11,530. 

Commodities

Gold continues to consolidate recent gains around $1,230 a Fibonacci level trading between $1,220 and $1.235 recently near $1,226. RSI steady above 50 indicates a consolidation phase within an ongoing uptrend.

Crude Oil WTI is still falling away from a recent retest of $53.85 channel resistance. The price has slipped under $53.00 toward $52.65 with next potential support at the 50-day average near $52.25 then $51.65.

FX

US Dollar Index remains under accumulation, building on its recent breakout over 101.00 which completed a saucer bottom by advancing to test its 50-day average near 101.40. Next upside tests possible near 101.50, 101.70 and 102.00 with support rising toward 101.15. RSI above 50 and rising confirms upward momentum increasing.

USDJPY is consolidating recent breakouts over 114.05 and 50 on the RSI which signalled the start of a new upswing. The pair has been trading near 114.45 with next potential resistance near 115.00 a round number and the 50-day average followed by a Fibonacci test near 115.50.

EURUSD is breaking down again, taking out $1.0585 a Fibonacci level and falling toward $1.0550 with a potential test of the $1.0500 round number looming. RSI under 50 and falling indicates downward momentum increasing.

EURGBP is sitting on the 0.8500 round number, trading above its 200-day average and Fibonacci support near 0.8460 and below its 50-day average near 0.8540. RSI under 50 suggests neutral to downward momentum. 

GBPUSD is testing support at its 50-day average near $1.2410. RSI breaking under 50 suggests momentum turning downward with next potential support near $1.2350. Initial resistance on a bounce possible near $1.2480 a lower high. 

USDCAD is sitting just below $1.3100, the midpoint of an emerging $1.3000 to $1.3200 sideways channel, trading near $1.3075. RSI under 50 indicates consolidation within a bigger downtrend. 

CADUSD is steady near $0.7650. Higher lows below $0.7700 continue to form a bullish ascending triangle. RSI holding above 50 indicates continued underlying accumulation. Initial support near $0.7630.

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