Oil inventories, ADP payrolls, service PMI reports and Fed minutes in focus

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This article was last updated on April 16, 2022

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It’s another big day for economic news that could potentially move the markets. Overnight, the spotlight has been on crude oil which has seen both Brent and WTI gain 0.9% and WTI put $50.00 farther into the rear view mirror. A 1.8 mmbbl drawdown in US API crude oil, a 2.5 mmbbl drop in gasoline inventories and a 2.0 mmbbl drop in distillate inventories helped to reignite interest in energy commodities by indicating the big builds of recent months are over and the market is starting to come back into balance. The results were better than what is being expected from this morning’s DOE reports, so there is potential for a positive surprise on the numbers. A miss, on the other hand, could spark a reversal so there’s potential for more action in energy markets today. 

Stock markets around the world along with most currencies have been holding steady overnight. US index futures and the FTSE are flat while the Dax is down 0.4% and the Nikkei up 0.3%. Service PMI reports from around the world have been mixed with US numbers due mid-morning. France’s CAC is up 0.1% after last night’s Presidential all-candidates debate with reports suggesting Melanchon turning in a strong performance while Le Pen apparently less visible with other Euro-skeptics on the stage.

Currency markets have been steady for the most part. A missile test by North Korea ahead of the upcoming US Trump – China Xi summit hasn’t sparked a move into defensive plays like gold or JPY which are steady today. The biggest move in currencies has been a strong bounce by the British Pound which has climbed back toward $1.2500 against the US Dollar. A stronger than expected UK PMI report and suggestions UK PM May could be flexible on movement of people, an area that could be a sticking point in negotiations. The EU Parliament passed a resolution on the Brexit process so the wheels are turning away while both sides continue to stake out positions.

US ADP payrolls are due this morning. The street is looking for a big retrenchment back toward 190K from 298K last month. A positive employment to US manufacturing PMI on Monday, however, suggests that there may still be a positive Trump effect on employment so I am thinking 250K.

FOMC minutes are due in the afternoon but are likely to be a non-event considering the street has had several weeks to react to the dot plot, statement and numerous comments from Fed officials since the meeting. The big question remains whether the Fed will slow rate hikes at some point and shift focus to shrinking its balance sheet. The surprise resignation of Richmond Fed President Lacker over leaked information hasn’t impacted trading but does highlight an ongoing changing of the guard at the Fed likely to continue over the next year.

Chart Signals: WTI and GBP rally, indices send mixed signals

WTI crude oil continues its upswing today putting more space between it and the $50.00 level. Meanwhile, GBP is gaining ground against both USD and EUR today. Indices are mixed with the Germany 30 and UK 100 forming tops while US indices look indecisive.

North American and European Indices

US 30 is bouncing around between 20,650 and 20,720. The index is sending mixed signals. It appears to be pausing within an emerging downtrend but the 50-day average holding, the RSI back testing 50 and higher lows for the index indicate a recent correction may be ending and the underlying uptrend resuming. 

US SPX 500 continues to consolidate between 2,350 and 2,362 while sending mixed signals RSI testing 50 suggests momentum may be about to turn decisively downward but the index holding above its 200-day average near 2,342 and a symmetrical triangle forming suggests this could be a consolidation phase within a bigger uptrend.

US NDAQ 100 continues to struggle with resistance near 5,450 and appears to be forming a double top. Lower highs in the RSI following a negative divergence suggests upward momentum is slowing. Initial support appears near 5,400 followed by 5,320.

UK 100 continues to form a head and shoulders top, retesting a broken uptrend line near 7,345 as new resistance. RSI near 50 suggests momentum stabilizing above 7,260 neckline support for now. 

Germany 30 is showing more signs of having peaked earlier this week. The index has dropped back toward 12,220 from 12,320 overnight. For now it remains above 12,165 its recent breakout point but a breach would signal a downturn with round number and trend support near 12,000. RSI fralling away from 70 indicates a correction deepening.

Commodities

Gold remains in consolidation mode, still struggling with resistance at its 200-day average near $1,260 but at the same time, finding support at a Fibonacci cluster in the $1,250 to $1,255 area with more support possible near $1,242.

Crude Oil WTI continues to swing upward with rising RSI indicating accelerating upward momentum. Support moves up toward $50.90 from $50.00 while the price challenges its 50-day average near $51.30. Next potential upside tests in the $52.00 to $52.40 area.

FX

US Dollar Index continues to pause near 100.40 following a rounded bottom breakout. RSI flat just above 50 confirms sideways momentum. Next resistance possible near 101.00.

USDJPY continues to attract support above the 110.00 round number, recently trading between 110.60 and 111.00. RSI suggests downward momentum levelling off. Initial resistance on a rebound possible near 111.25 a Fibonacci level then 111.60.

EURUSD appears to be stabilizing between $1.0620 and $1.0700 digesting a recent selloff. RSI steady just below 50 suggests momentum shifting into neutral. Recent trading between $1.0660 and $1.0690 around the 50-day average.

EURGBP’s recent rally has been contained by the 50 and 200-day averages near 0.8590 where a Death Cross recently occurred. RSI still under 50 and falling confirms momentum turning downward with next potential support near 0.8540 then 0.8500. 

GBPUSD is resuming an uptrend following successful tests of $1.2400 support on the pair and 50 on the RSI. The pair has rebounded from $1.2420 toward the $1.2470 to $1.2490 area with next resistance possible near $1.2500 then $1.2555 and $1.2600.

USDCAD has paused near the middle of its $1.3300 to $1.3500 sideways range recently trading between $1.3380 and $1.3400. RSI holding 50 indicates underlying upward momentum remains intact for now.

CADUSD is trying to build on a bounce up off of $0.7430 trading near $0.7480 but it really needs to retake $0.7500 and 50 on the RSI to call off its current downswing and signal an upturn.

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