EUR falters as traders take profits against Macron election win

Considering how much European indices had run up over the last two weeks, capped off by new highs for the CAC and Dax Friday on anticipation Macron would win the second round of the French Presidential election, it’s not a surprise to see traders taking profits against his even bigger than expected win. The CAC is down 0.8% so far with the Dax down 0.2%.

What is interesting though, is the inability for EURUSD ‎to crack $1.1000 today. After all, it his win was such a big victory for stability and for the EU one would think EUR would be going up, not down. For that matter, defensive havens gold and JPY which were hammered by outflows of capital over the last two weeks, are on the rebound.

It looks like with this election done and dusted, traders are quickly moving on to the next set of uncertainties. Coming up next are the UK election in June (where PM May’s Conservatives just won big in local elections and the German election in September (where Chancellor Merkel’s party won a regional election on the weekend), both of which seem set to return their incumbents.

The next set of major uncertainties then are the start of Brexit negotiations and the US budget showdown this fall, followed by Italian elections and the end of the current Greek bailout program by the summer of 2018. ‎Markets usually look 6-9 months out so all of these issues are coming within forecast horizons now that the most immediate risk has passed.

In other developments, crude oil is consolidating Friday’s big bullish reversal, suggesting that recent selling pressure has been washed out. Saudi Arabia indicates that OPEC and Non-OPEC producers like Russia are supportive of keeping production cuts going for another six months and (most importantly) possibly beyond.

US index futures have big technical tests underway today with Dow futures at 21,000 and SPX futures at 2,400. We’re now past the peak of earnings season for market moving big caps although a few retailers like Macy’s report later in the week. It’s also a light day for economic and political news in North America as everyone continues to digest last week’s news.

Chart Signals: Euro pairs and European indices turn back downward

It looks like the big Europe rally of the last two weeks has ended with EUR failing at $1.1000 against USD and 0.8500 against GBP. Bearish reversals are also underway in France 40 and Germany 30. Meanwhile, US indices are retesting round numbers and double top resistance with the SPX attempting a breakout.

North American and European Indices

US 30 is bouncing around 21,000 trading between 20,920 and 21,020. RSI flattening out at a lower high indicates upwards momentum weakening. Next support possible near 20,860.

US SPX 500 is attempting to break out today clearing and the retesting 2,400 having traded up toward 2,408. It remains to be seen if this is the start of a new upleg or a buying climax. Next measured resistance possible near 2,420 then 2,475.

US NDAQ 100 has slipped back slightly after reaching a new high near 5,665 in early trading. RSI overbought and levelling off indicates upward momentum fading and a pause or correction possible. Next measured resistance possible near 5,690 with next support near 5,610. 

UK 100 is hanging around 7,300 trading between 7,290 and 7,330. Holding above 7,260 appears to be calling off a recent head and shoulders top. RSI holding 50 and rising indicates momentum turning back upward following a selloff.

Germany 30 has a bearish key reversal day underway. The price peeked up to a new high near 12,870 but has since been slammed back down under 12,700 with next potential support tests ear 12,600 then 12,500. RSI back under 70 signals upward momentum fading and a pullback starting.

France 40 has turned back downward giving back nearly all of Friday’s gains as it drops back from 5,475 toward 5,385. RSI rolling back under 70 from overbought signals a correction starting. Next potential support near 5,360 then 5,285 23% and 38% retracements if the recent election rally.

Commodities

Gold’s big selloff has been contained for now by $1,220 Fibonacci support. RSI turning back upward indicates downward pressure easing for now.  Initial resistance has emerged near $1.236 with more possible near $1,242.

Crude Oil WTI ran into resistance near $46.70 and has dropped back toward $45.90 in what looks like normal backing and filling following Friday’s big bullish reversal. The price remains well above $45.00 support. RSI still oversold, indicates potential for a trading rebound.

FX

US Dollar Index has bounced up off of 98.30 support but hasn’t been able to get very far still stuck below 99.00 with additional resistance possible near 99.25. RSI steady near 40 suggests a consolidation phase underway within a bigger downtrend. 

USDJPY is still bouncing around between 112.15 and 113.00 with RSI confirming momentum levelling off. So far this appears to be a pause within an uptrend with next potential resistance near 113.35 a Fibonacci level then 114.15 with next support at the 50-day average near 111.65.

EURUSD failed to break through $1.1000, confirming round number resistance. The pair has been selling off since then, while RSI has also turned downward. The pair has dropped back under $1.0950 with next potential support near $1.0930 then $1.08590 both Fibonacci levels.

EURGBP failed to break out over 0.8500 and failed to retake 50 on the RSI. This indicates its bigger downtrend remains intact and appears to be resuming with the pair dropping back under 0.8460 a Fibonacci level with next potential support near 0.8425 then 0.8385 both Fibonacci levels.

GBPUSD continues to encounter resistance at the $1.3000 round number while RSI suggests upward momentum levelling off into a consolidation phase. It’s underlying uptrend remains intact through this pause above potential support near $1.2940, $1.2900 and $1.2830.

USDCAD is having an inside day consolidating between $1.3640 and $1.3690 after diving down from $1.3800 on Friday. RSI back under 70 after being really overbought signals a correction starting. Next potential support near $1.3590 a previous breakout point.

CADUSD met resistance near $0.7325 and has slipped back toward $0.7300. It still appears to be trying to build a base above support in the $0.7250 to $0.7270 area.

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