Lumber dispute sends CAD crumbling, huge earnings from Caterpillar sparks Dow rally

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This article was last updated on April 16, 2022

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The positive response by traders to the French first round election results and speculation the ‎pro-stability and market-friendly Macron will keep up his big second round lead has capital leaving defensive havens for risk markets again today. After a catch-up rally in Asia Pacific markets that saw the Nikkei gain 1.0%, gains have slowed a bit in Europe with the Dax flat while the CAC and FTSE are up 0.3%. US index futures are up 0.2%.

In currency trading, the Loonie is nose diving on concerns over trade sanctions from the US. Overnight press reports indicate President Trump is looking to slap a 20% duty on Canadian softwood lumber. It remains to be seen what other measures may be coming related to the dairy oth other sectors as the US prepares to renegotiate NAFTA.

North Korea staged a live fire drill as a US missile submarine pulled into a South Korean port so tensions remain high. Traders remain focused on tomorrow’s tax reform announcement with reports suggesting a cut in the corporate tax rate to 15% from 35% could be coming. There also have been suggestions the President could back down and drop his demand for immediate border wall fun‎ding to avoid a government shutdown (remains to be seen if that is wishful thinking or not).

It’s another big day for earnings reports with the focus on big Industrials and consumer products companies. So far results have indicated that President Trump has been good for bank earnings. This week we find out if his effect has been as positive for other key sectors of the economy.

Caterpillar’s earnings report has been truly spectacular, signalling a major turnaround for the company. Not only did it beat the street by a mile, big increases to sales and earnings guidance indicate management thinks its prospects look really bright. McDonalds and 3M also reported earnings well above expectations, boosting confidence. This news has sparked a rally in US indices in the last few minutes, showing that traders are still ready to respond to really good news and providing fundamental support for the current upswing.

Chart Signals: CAD crushed while US indices rally

The loonie is getting hammered today, breaking down against USD with $1.3500 becoming a floor for USDCAD. Meanwhile. US indices appears to be attracting renewed interest with the US NDAQ 100 rallying to new highs while the US SPX 500 and US 30 break out of short term downtrends to signal new upswings within their broader sideways channels.

North American and European Indices

US 30 is climbing again today, building on its breakout from a falling channel by driving up off its 50-day average near 20,735 through 20,800 and advancing on 20,880. Next potential resistance near 21,000 then 21,130. Rising RSI confirms increasing upward momentum.

US SPX 500 is consolidating Monday’s big breakout over its 50-day average near 2,355 that caused a descending triangle to fail. The index is holding on to recent gains near 2,375 with resistance possible near 2,382 then 2,400. RSI back above 50 and climbing indicates upward momentum increasing again. 

US NDAQ 100 is building on its breakout to a new high, leaving 5,480 in its dust as it clears 5,500 and advances on 5,520. Next upside resistance possible near a measured 5,605. RSI confirms uptrend but is approaching overbought territory.

UK 100 is holding above 7,260 the former neckline of a head and shoulders top, trading near 7,275 but it remains below 7,290 with more resistance possible at its 50-day average near 7,310. RSI running into resistance at a downtrend line and failing to retake 50 suggests the recent pop may be an upward correction within a bigger downtrend.

Germany 30 peeked above 12,500 but failed to hold it, as resistance came in near 12,515 with more possible near 12,600. A negative RSI divergence indicates upward momentum slowing. The index has dropped back into the 12,440 to 12,470 area with next potential support near 12,380 a retest of its recent breakout point. 

Commodities

Gold still appears to be rolling over, particularly the RSI which indicates upward momentum weakening and a downturn pending. Resistance falls toward $1,276 from $1,280 with the price near $1,270 and next support possible near $1,266 then the 200-day average near $1,255.

Crude Oil WTI’s big selloff appears to have been contained by support at its 200-day average near $48.60. Should that fail, however, next potential support appears near $47.70 a Fibonacci level. For now, the price has rebounded toward $48.90 with initial resistance possible in the $49.80 to $50.00 area.

FX

US Dollar Index continues to trend downward. An attempt to regain 99.00 failed at a lower high near 99.10 and the index has dropped back toward 98.85 with next potential support near 98.65. RSI under 50 and falling confirms downward pressure increasing. 

USDJPY remains in an upswing, holding above 109.40 the bottom of a breakaway gap and rallying up through 110.00 and on toward 110.55. Next potential resistance appears near 112.00 where the 50-day average and 38% retracement of the recent downtrend converge. RSI regaining 50 confirms momentum turning back upward.

EURUSD is consolidating its recent breakaway rally in the $1.0845 to $1.0900 area. The pair is attracting support above a Fibonacci cluster. Upside resistance appears near $1.0945 a Fibonacci level, then the $1.1000 round number. Rising RSI confirms upward momentum but is approaching overbought territory.

EURGBP’s rebound attempt has paused near the 0.8500 round number near downtrend resistance. RSI remains below 50 suggesting the recent rally has been a trading bounce within an ongoing larger downtrend. 

GBPUSD is consolidating recent gains near $1.2800, well supported above $1.2710 its recent breakout point. Initial support appears near $1.2745 with initial resistance near $1.2855 then $1.2900.

USDCAD is breaking out today, rallying up off of $1.3500, through $1.3530 its prior high and on toward $1.35675. Next potential resistance appears near $1.3595 then $1.3655 and $!.3830 a 62% retracement of its previous downtrend.

CADUSD is breaking down again, taking out $0.7380 a Fibonacci level and falling toward $0.7365 with next potential support near $0.7350 its December low then $0.7270 a 62% retracement of its early 2016 uptrend. Falling RSI confirms downward pressure increasing.

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