Stocks surge, commodities crash, Poloz preview

Different asset classes have been heading in vastly different directions, a sign of indecision among traders following Wednesday’s ‎FOMC decision and French debate and the upcoming nonfarm payrolls (Friday) and French election (Sunday). In the US, the wheels of political progress may be starting to move with the House potentially set to vote on health care reform today.

US index futures are trading up 0.3% this morning, boosted by strong results from major insurance companies led by Manulife, MetLife and Prudential. Facebook and Tesla Motors may also be active after reporting earnings overnight. Yesterday’s comments from the Fed about Q1 weakness being transitory has been seen as supportive of an outlook for strong economic and earnings growth.

European indices are up as well with the FTSE up 0.3% the Dax up 0.9% and the CAC up 1.0%.   Traders still appear to be expecting a Macron win after last night’s debate. Generally positive service PMI reports, especially for the UK and Italy, plus a big month for Spanish employment also appear to be boosting spirits.

Commodities, on the other hand, have been hit hard again overnight. Copper is down 0.5% adding to a 4% decline yesterday. Nickel, lead and zinc are all down 2-3% today. This weakness‎ weighed on resource currencies like AUD and NZD overnight. WTI and Brent Crude are down 1.0% on press reports that two main factions in Libya’s civil war have made a breakthrough agreeing to unite institutions and the military, reducing the risk of further production disruptions.

CAD is down slightly this morning but Canadian resource stocks could come under pressure again today. Canadian Natural missed expectations while Penn West beat the street.

US and Canada trade reports are out today which could take on added significance with NAFTA negotiation talks coming. Today’s speech from Bank of Canada Governor Poloz may also be significant. Earlier this year, he had warned that the BoC stands ready to cut interest rates if US trade policy changes impact the Canadian economy. This had been downplayed after a successful summit and the Keystone XL approval. Since the last Bank of Canada meeting, however, President Trump has ramped up the Blame Canada hype so traders will be looking to see Governor Poloz puts a rate cut back on the table. Whether he does or not could have a significant impact on CAD trading today.

Chart Signals: New high for Germany 30, EURGBP base forming, Gold extends breakdown

Germany 30 has rallied to a new high today but other indices are not confirming with double tops still in place for the US 30 and US SPX 500. EUR and GBP are both up a bit today but with the Euro outperforming ahead of the French election, an ascending triangle base has been forming in the cross pair. Gold remains under pressure after breaking down below its 50 and 200-day averages yesterday, a significant technical meltdown.

North American and European Indices

US 30 has regained 21,000 barely and RSI suggests that momentum may be trying to turn upward but it really needs to break out over 21,230  to call off a double top and signal the start of a new upleg. Initial support possible near 20,900 should it fail.

US SPX 500 is still bouncing around between 2,380 and 2,400 keeping a double top in place. Flat RSI confirms sideways momentum. Next resistance on a breakout possible near 2,420 with next support at the 50-day average near 2,365.

US NDAQ 100 is holding above 5,600 but at the same time, despite morning gains, it remains stuck below its recent high near 5,645. Next resistance on a breakout possible near 5,690 with next support near 5,575. RSI is overbought and suggests upward momentum levelling off with the risk of a correction.

UK 100 popped up toward 7,280 but has dropped back from a lower high toward 7,260 the neckline of a completed head and shoulders top. Next support near 7,200 with next resistance near 7,300 and the 50-day average. RSI still under 50 keeps its downtrend intact, it needs to break out to signal an upturn.

Germany 30 is breaking out today, clearing 12,535 and rallying toward 12,635 with next measured resistance possible near 12,690. RSI is getting overbought but for now is confirming increasing upward momentum.

Commodities

Gold continues to retreat building on Wednesday’s big breakdown that took out $1,250 plus its 50 and 200-day averages. Resistance has dropped toward $1.240 with the price falling toward $1.235. Next potential support near $1.220 a Fibonacci level. Falling RSI confirms increasing downward momentum.

Crude Oil WTI is retesting support in the $46.55 to $47.00 area which could end in a big breakdown or a double bottom. RSI confirms increasing downward momentum but is getting oversold indicating potential for a bounce. So far, $47.00 has held, but it would need to regain $47.70 a Fibonacci level to signal an upturn. On a breakdown, next support may not appear until closer to the $45.00 round number.

FX

US Dollar Index appears to be building an ascending triangle base between 98.55 and 99.30. It’s failure to penetrate into a downward gap, and RSI still stuck under 50 suggest, however, that it’s not ready to really rally.

USDJPY continues to climb, building on its breakout over 112.15 by advancing on 112.85 with next potential resistance near 113.35. Rising RSI signals upward momentum still increasing.

EURUSD has bounced up from $1.0880 toward $1.0940 as it continues to consolidate a recent breakout in the $1.0850 to $1.0950 area above the top of a breakaway gap. RSI steady near 70 indicates a pause within an uptrend. Next potential resistance near the $1.10000 round number.

EURGBP continues to form an ascending triangle base below 0.8500 with support moving up toward 0.8460 a Fibonacci level. RSI approaching 50 from below 0.8555 indicates downward pressure easing and an upturn pending. Next potential resistance near 0.8555 and the 50-day average with next support near 0.8405. 

GBPUSD’s consolidation range continues to widen with the pair dropping toward $1.2830 before finding support and rebounding toward the $1.2880 to $1.2900 area. RSI indicates upward momentum shifting toward neutral in a normal consolidation phase. Next resistance near $1.2950.

USDCAD remains under accumulation with support rising form $1.3680 to $1.3700 and the pair advancing on $1.3740. Next resistance appears possible near $1.3760 then $1.3830 a Fibonacci level. Overbought RSI suggests potential for a pause or correction at some point but for now its uptrend continues.

CADUSD has been finding support near $0.7270 a Fibonacci level with an oversold RSI indicating potential for a rebound. Initial resistance possible near $0.7300 then $0.7325.

Be the first to comment

Leave a Reply

Your email address will not be published.


*


Confirm you are not a spammer! *