Oil continued its wild ride overnight but may be getting washed out as WTI has bounced back above $45.00 toward $45.50 after plunging down toward $43.75 overnight. Traders continue to finally adjust to the problem that OPEC production cuts have been replaced by higher US supply and because of this, additional cuts from the cartel are unlikely.
Generally negative sentiment toward commodities in general hasn’t been helping either. Base metals are down again today with nickel falling 2.3% and copper falling another 1.0%. Concern about the potential impact of a weakening China and a soft US economy on resource demand has given the b bears reason to growl.
Stock markets are mixed with US index futures up slightly and European indices down slightly. EUR is also down slightly. European markets are up huge ahead of Sunday’s second and final round of French Presidential voting. Although Macron is widely expected to score a runaway victory, some traders appear to be starting to lock in profits ahead of the result. This could be to avoid getting caught by a surprisingly strong performance form Marine Le Pen or to get ahead of potential profit-taking on a Macron win.
This morning brings US nonfarm payrolls one of the biggest announcements of the week. Last month payrolls came in shockingly low at 98K, way below street and ADP. This time the street is expecting 190K, slightly above Wednesday’s ADP payrolls which fell back toward 175K. I think we could get a strong upward revision to last month of about 40K. Jobless claims have remained low so I also think we could see an increase of 175K
Today also brings the return of Fed speakers with a big slate including Chair Yellen and Fed Chair Yellen. As with payrolls and other economic report, traders are likely to assess their comments through the lens of whether a June rate hike is still on or not. Last week’s weak GDP report suggested no while Wednesday’s FOMC meeting statement suggested yes. The Fed is in a particular bind at the moment as a looming budget battle and potential government shutdown means that September is likely off the table for a move.
Chart Signals: Big overnight swings in Oil while indices keep forming tops
Oil staged a major bullish reversal overnight doing a round trip from $45.00 toward $43.50 and back in what could be a big washout. Meanwhile major indices like the US 30 and US SPX 500 continue to form double tops while indices that broke out recently like Germany 30 and US NDAQ 100 are looking tired. A lot of overbought and oversold RSIs out there suggest potential for reversals at some point.
North American and European Indices
US 30 is still stuck below 21,000 keeping a double top near 21,130 intact. The index has dropped into the 20,880 to 20,940 area with next support possible near 20,765 the 50-day average. RSI indicates upward momentum weakening.
US SPX 500 remains below 2,400 where a double top has formed, trading near 2,390 with next potential support near 2,376 then the 50-day average near 2,364. RSI indicates upward momentum levelling off into a consolidation phase.
US NDAQ 100 has paused between 5,600 and 5,645 to consolidate recent gains and work off an overbought RSI. Next measured resistance possible near 5,690 with next support possible near 5.575 then 5.525 in a pullback.
UK 100 continues to encounter neckline resistance near 7,260 confirming a head and shoulders top remains in place. RSI under 50 indicates continuing distribution. Initial support possible near 7,260 then 7,200.
Gold has stabilized in the $1,225 to $1,235 area following two days of steep declines. So far this looks like a pause within a bigger downswing with next support possible near $1,220 a Fibonacci level and next resistance possible near $1,242.
Crude Oil WTI is looking washed out and appears to be staging a bear trap reversal having plunged down from $45.00, bouncing off $43.50 a Fibonacci level and then rallying back up into the $45.00 to $45.60 area. RSI deeply oversold suggests selloff may have been overdone and a bounce possible.
US Dollar Index is testing the bottom of a 98.55 to 99.30 trading range. The index remains under distribution trading below 99.00 and the RSI steady below 50. Next measured support near 97.55 with next resistance near 99.55 the top of a recent downward breakaway gap.
USDJPY appears to be levelling off between 112.00 and 113.00 around 112.15 a Fibonacci level. Next resistance near 113.35 a Fibonacci test with next support at the 50-day average near 111.70. RSI suggests a shift in momentum from upward to sideways.
EURUSD is stuck between $1.0950 its recent breakout point and the $1.1000 round number while RSI suggests upward momentum levelling off. Next potential resistance near $1.1050 with next support possible near $1.0900.
EURGBP is testing 0.8500 where a breakout would complete an ascending triangle base and signal the start of an uptrend with next potential resistance near 0.856309 then 0.8600. Support rises toward 0.8460 a Fibonacci level.
GBPUSD is holding steady near $1.2930 as it continues to consolidate recent gains between $1.2860 and $1.2960 with additional resistance possible near the $1.3000 round number.
USDCAD keeps trending upward, advancing into the $1.3750 to $1.3790 area with next potential resistance near $1.3830 a Fibonacci level. RSI really overbought but is confirming continued upward momentum for now.
CADUSD is deeply oversold but remains under distribution for now, falling under $0.7270 a Fibonacci level with next potential support near $0.7200. Initial rebound resistance possible near $0.7300