Steady markets await Yellen and Poloz speeches

Stock markets were stable overnight with the initial shock of health care reform fading. Quickly ending a debate that was going in circles to move on to tax reform and maybe infrastructure spending helped to soften the blow. This also sends a message to Congress they can’t drag on debate forever and leaves the door open to back channel negotiations that could end up being more fruitful. That being said, progress is going to need to be made on something before traders lose patience with the political process.

US index futures and the FTSE are up 0.1% while the Dax is up 0.6% and the Nikkei has gained 1.1% in a bigger bounce. ‎Currencies are holding steady with Gold, GBP, EUR and JPY holding on to recent gains. WTI Crude is up 0.7% essentially clawing back yesderday’s loss.

The US Dollar Index remains below 100.00 having taken the brunt of the selling pressure from the health care failure. Traders have recognized that the failure means that other initiatives could get watered down or delayed. Because of this President Trump’s fiscal efforts may not be as stimula‎tive or inflationary as previously thought, easing the pressure on the Fed to raise interest rates.

The inability of Congress to reach a deal also raises the risk of a big showdown later this year over the budget and debt ceiling. This could force the Fed to skip a quarterly hike, likely September. Last night Chicago Fed President Evans indicated four hikes as unlikely based on how inflation is tracking and indicated he (speaking for the dovish faction at the Fed) favours two increases‎.

Today, a number of FOMC members are out speaking today with the most important being Chair Yellen, and Governor Powell, a permanent voter who doesn’t speak publicly very often. They may shed more light on the Fed’s monetary plans for this year.

Canada may also attract some attention from traders today with Bank of Canada Governor Poloz speaking. Earlier this year, Governor Poloz left the door open to an interest rate cut if Canada were to be impacted by US trade policy changes.

Since then, however, Canadian job growth has been spectacular, meetings between Canadian officials and their US counterparts have gone well and President Trump has made positive public statements about Canada. He approved Keystone XL last week ending eight years of delays and rejections under president Obama. Any change in tone from Governor Poloz could have a significant impact on trading in the Canadian Dollar (CAD) today.

Chart Signals: US Dollar consolidates losses while indices look vulnerable

The US Dollar has paused after a big breakdown Monday but has been unable to bounce back, enabling GBP, EUR, JPY and gold to consolidate Monday’s big gains at higher levels. Meanwhile, the FTSE, along with major US indices and the Dax continue to look like they are rolling over and starting to give back some of the gains made in recent months.

North American and European Indices

US 30 is consolidating recent losses just above 20,500 and its 50-day average. It remains vulnerable with the index falling toward 20,520 from 20,570 today and the RSI under 50 and falling confirming increasing downward pressure. Next potential support near 20,285 a 23% retracement of the post-election uptrend, then the 20,000 round number.

US SPX 500 remains under distribution falling from a lower high near 2,346 toward 2,338 and a test of its 50-day average. Next potential support appears near 2,313 a 23% retracement of the previous uptrend. Falling RSI indicates accelerating downward momentum.

US NDAQ 100 is still struggling with 5,395 resistance and appears to have completed the right shoulder of a head and shoulders top. RSI holding 50 suggests this could be a pause within an uptrend but a break of the 5,305 neckline would signal otherwise.

UK 100 remains under pressure having retested 7,300 where it broke an uptrend line as new resistance. This along with RSI falling away from 50 confirms a downturn underway with next potential support near 7,265 a Fibonacci level then 7,200.

Germany 30 continues to struggle with 12,100 resistance with a falling RSI indicating weakening upward momentum. It refuses to break down, however, still holding above 12,000 with more support in place near 11,900.

Commodities

Gold has encountered resistance near $1,255 a Fibonacci level with more possible near $1,260 a channel top and the 200-day average. RSI indicates upward momentum levelling off for now. Support rises toward $1,252 from $1,246.

Crude Oil WTI is sitting on $47.70 a Fibonacci level trading between $47.00 uptrend support and its 200-day average near $48.30. RSI back above 30 from oversold suggests recent selloff has run its course and downward pressure has started to ease.

FX

US Dollar Index has paused to digest recent losses, trading near 99.00 within Monday’s 98.65 to 99.35 range. Falling RSI suggests this as a pause within a continuing downtrend.

USDJPY continues to trend downward, falling from a lower high near 111.00 toward 110.45 with next potential support near the 110.00 round number then a Fibonacci cluster near 109.20. RSI confirms downward momentum. 

EURUSD has paused to digest recent gains continuing its staircase pattern. This time, its holding above a Fibonacci cluster near $1.0830 and below its 200-day average near $1.0880. Next potential resistance near $1.0910 with next support near $1.0775. Rising RSI confirms continuing accumulation. 

EURGBP has levelled off near 0.8660 a Fibonacci level trading between 0.8600 and 0.8700 holding above a moving average cluster near 0.8580. RSI sitting on 50 confirms neutral momentum and a possible tipping point.

GBPUSD is doing some normal backing and filling having encountered some resistance near $1.2600 with more possible near $1.2685 while trading near $1.2550 with more support possible near $1.2500. RSI near 60 suggests a pause underway within an ongoing uptrend.

USDCAD continues to climb. The pair has moved up toward $1.3400 with support rising to near $1.3375 from $1.3300 with next resistance possible near $1.3445 then $1.3475. RSI holding 50 and rising indicates underlying uptrend resuming.

CADUSD remains in a slump. The pair continues to fall away from $0.7500 and 50 on the RSI indicating continuing distribution. Resistance has dropped toward $0.7475 with next potential support near $0.7450 then $0.7410

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