This article was last updated on April 16, 2022
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The relentless drive higher by stock markets has stopped for a rest overnight. US index futures are trading down 0.1%, the Dax is down 0.2% while the FTSE and Nikkei are down 0.5%. Crude oil is steady while USD is down slightly against gold and major currencies.
There hasn’t been much in the way of overnight economic news except for a better than expected Australian jobs report. Therefore the pause appears to be mainly due to technical exhaustion. It too early to tell is a top may be forming or if this is a rest stop within a bigger advance.
One thing that could give US traders pause is increasing signs the Fed could raise rates at its March meeting. Following on from FOMC Chair Yellen’s testimony, regional Fed Presidents have been talking hawkishly. Last night, NY Fed President Dudley indicated he expects to see a small rate hike in the coming months if forecasts work out. Philadelphia Fed President Harker continues to look toward three hikes this year, the Fed’s party line while Boston Fed President Rosengren thinks we could see even more increases than that. This morning, Fed Vice-Chair Fischer suggested 2-3 hikes possible this year. The US Dollar Index is holding just above 101.00 indicating the street expects four rate hikes this year. Expectations in Fed Funds for a March rate hike have moved up to 36% from 15% a couple of weeks ago.
It’s a big day for earnings in Canada today. Results from EnCana, TransCanada and Cenovus in the energy sector have come in above expectations, indicating rising energy prices are paying off. Canadian Tire beat the street on sales and earnings with Tire same store sales up a strong 8.1%. Sun Life and Fortis also beat the street by wide margins. Bombardier disappointed again posting an even deeper loss than the market had been expecting. Gold earnings were mixed with Barrick and Goldcorp beating the street while Agnico-Eagle and Kinross fell short of expectations
Chart Signals: USD Dollar rollover lifts EUR, GBP, JPY and CAD
The US Dollar has been fading back this morning following comments from a number of Fed speakers yesterday. This has enabled EUR, GBP and JPY to rally up off successful moving average tests, while CAD pairs continue to form Canada bullish triangles. Gold is also bouncing back as USD fades. Indices have paused and are looking exhausted technically but US indices have yet to follow the Germany 30 and UK 100 downward.
North American and European Indices
US 30 is having an inside day trading near 20,610 digesting a rally up from 20,500 toward 20,650. RSI really overbought and rolling over suggests upward momentum peaking and a correction possible.
US SPX 500 has paused just below 2,350 with resistance emerging near 2,352 after completing a rally up from 2,332 and a measured move. Overbought RSI turning downward suggests upward momentum may be exhausted and a correction possible.
US NDAQ 100 has levelled off near 5,300 to digest recent gains. RSI is really overbought but has been confirming upward momentum to date. Initial support in a pullback possible near 5,260.
UK 100 has dropped back under 7,300 after peaking at a lower high near 7,320. A lower high in the RSI confirms upward momentum weakening. Recently trading near 7,275, next potential support appears near 7,260 then 7,200.
Germany 30 is starting to roll over, falling away from lower highs in both the index and the RSI, a sign that momentum has peaked and a correction starting. Resistance falls from 11,880 toward 11,780 with next support possible near 11,700 then the 50-day average near 11,555.
Commodities
Gold has popped back above $1,230 into the upper half of its $1,215 to $1,245 trading range recently between $1,235 and $1,239. RSI confirms a sideways consolidation phase underway within a larger uptrend.
Crude Oil WTI continues to attract support above its 50-day average near $52.25 while remaining stuck below $53.85 resistance. Recent trading in the $52.90 to $53.30 zone.
FX
US Dollar Index is forming an evening star candle pattern dropping back under 101.00 toward 100.70 after a failed attempt to clear its 50-day average near 101.35 on Wednesday that created a shooting star/bull trap. Next support possible near the 100.00 round number. RSI rolling back under 50 suggests momentum downturn.
USDJPY is turning back downward again. Having retested resistance at its 50-day average near 115.00, the pair has plunged back down through 114.05 on its way toward 113.50 with next potential support near 113.25 then 112.35.
EURUSD is breaking out of a short term downtrend, rallying up off a successful test of its 50-day average near $1.0590 back up toward $1.0640 with next resistance possible near $1.0660 then $1.0670. RSI needs to retake 50 to confirm the upswing.
EURGBP is sitting on the 0.8500 round number stuck between its 200-day average near 0.8460 and its 50-day average near 0.8525 trying to decide which way to break.
GBPUSD is turning upward again, reclaiming $1.2500 as it bounces up off a successful retest of 50-day average support near $1.2410. Next potential resistance near $1.2580. RSI holding 50 indicates underlying accumulation remains intact.
USDCAD continues to form a descending triangle of lower highs above support in the $1.2975 to $1.3000 zone. The pair remains below $1.3100 falling into the $1.3020 to $1.3050 zone. RSI falling away from 50 indicates downward pressure increasing. Next potential support on a breakdown near $1.2900.
CADUSD remains under accumulation forming an ascending triangle of higher lows below $0.7700 resistance with more possible at a Fibonacci cluster near $0.7725. RSI above 50 and rising indicates upward momentum accelerating.
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