Stock markets around the world have bounced back a bit overnight. US index futures are trading up 0.3% the FTSE is up 0.4%, the Dax is up 0.6% and the Nikkei is up 1.5%. Crude oil is up 0.5%. This appears to be a trading bounce with the Dow still under 21,000 and WTI still under $50.00 but the Dax has regained 12,000.
Currency markets are mixed today. Defensive havens like gold and JPY remain under pressure with the yellow metal down 0.6% and trading below $1,200. Resource currencies have bounced back a bit with USDCAD slipping back under $1.3500 and AUDUSD holding $0.7500. EUR is up slightly while GBP is down slightly against USD. The UK trade deficit wasn’t quite as bad as the street had expected while Germany’s trade surplus, the object of particular attention across Europe and in the US, continues to fall, coming in well below the street estimate.
Fed Chair Yellen indicated a week ago that the Fed would consider raising interest rates this month following an assessment of employment and inflation trends. Wednesday’s massive 298K increase in ADP private sector payrolls would appear to seal the deal with Fed Funds pricing in a 98% chance of an increase. Traders may look to this month’s nonfarm report for confirmation of the ADP numbers. In addition to the headline jobs number, the average earnings data may also attract attention as a sign of wage inflation which is harder to claw back than commodity price inflation.
The ADP Payrolls report was 111K above consensus, indicating that the street was way too pessimistic. With the street at 200K if we get half the beat in nonfarm that we saw in ADP, we could get a 255K print.
I also get the sense that for the third month in a row, the street may be too pessimistic about Canada jobs as well. We’re in peak energy exploration season and oil prices are a lot higher than last year, plus the US has been doing well, so things should be looking up for Canada too. While a retrenchment form last month’s big 48K increase would be understandable, I think the street calling for a 5K decrease is overdone again. I’m thinking a 20K increase in Canada jobs for this month.
Chart Signals: Gold and Yen break down while indices bounce
Defensive havens remain under pressure with gold falling under $1,200 and USDJPY breaking out over 115.00. CAD is also showing signs of bottoming with USDCAD trading near $1.3500. Indices have rebounded a bit this morning with the Germany 30 regaining 12,000 but it remains to be seen if this is a trading bounce or bigger uptrends resuming after a small correction.
North American and European Indices
US 30 is on the rebound advancing back up into the 20.900 to 20.940 area having successfully retested its uptrend support line near 20,840. Next resistance appears near 20,000 them 20,155. RSI suggests, however, that this could just be a trading bounce.
US SPX 500 found support at a higher low near 2,350 and has bounced back up toward 2,375 with resistance still in place near 2,400. RSI suggests stabilization after a recent correction but the index remains vulnerable to a correction.
UK 100 has bounced back abo e 7,300 into the upper half of its 7,200 to 7,400 trading channel. RSI holding well above 50 indicates its underlying uptrend remains intact as an ascending triangle forms.
Germany 30 has regained 12,000 as it continues to trend upward in a rising channel above its 50-day average. Support moves up from 11,880, the index is trading near 12,045 and next resistance appears near 12,070 then 12,110.
Gold is breaking down today, taking out $1,200 and sliding toward $1,195 with next potential near $1,183 its January low. RSI under 50 and falling indicates downward momentum accelerating. Initial resistance on a rebound possible near $1,205.
Crude Oil WTI is having an inside day trading between $49.20 and $49.70 digesting the big p0lung and big breakdowns of the last two days. Support at the 200-day average near $48.40 has held but the price would need to retake $50.00 to call off this emerging downtrend.
US Dollar Index is sending mixed signals. The index is sitting just below 102.00 but remains in an uptrend of higher lows forming an ascending triangle below 102.25 with next resistance near 103.00. RSI, however, suggests momentum levelling off.
USDJPY continues its upswing, breaking out over 115.00 which may become support and advancing on 115.50 Fibonacci resistance. Rising RSI confirms upward momentum increasing with next potential resistance near 117,00 on a breakout.
EURUSD is showing signs of turning back upward. Support has moved up from $1.0540 toward $1.0585 with the pair regaining $1.0600. RSI has moved up off 40 and is testing 50 where a breakout would signal an upturn with next potential resistance near $1.0625 then $1.0640, the 50-day average then a recent high.
GBPUSD is still stabilizing between $1.2140 and $1.2180 potentially forming the right shoulder of a head and shoulders base. It needs to clear $1.2200 to signal an upturn with next downward support near $1.211. RSI suggests downward pressure levelling off.
CADUSD appears to be stabilizing near $0.7400 within a $0.7375 to $0.7415 Fibonacci cluster. An oversold RSI indicates potential for a pause or a rebound with initial resistance possible near $0.7475.