Overnight surprises have had a significant impact on trading that could continue into today’s action. President Trump surprised the world overnight by firing FBI Director Comey. This news has reminded the street that the current political environment in the US is unpredictable and that being complacent is dangerous. Gold has bounced back a bit in recognition that just because France turned out the way the street wanted, it’s not all going to be smooth sailing ahead politically.
US index futures and continental indices are trading lower this morning on the Trump news. The one exception has been in the UK where the FTSE and Sterling are both up today. There have been reports of dissent in Labour that could lead to the formation of a breakaway faction should Corbyn try to stay on after the vote. This plus strong polling leads for PM May has boosted expectations of a decisive conservative win in next month’s vote.
Crude oil has been rallying overnight with both WTI and Brent gaining over 1.0%. API reported a 5.3 mmbbl drawdown in US inventories suggesting the supply-demand balance may be finally starting to improve. Today’s DOE mid-morning reports may attract significant attention from traders looking for confirmation.
Earnings may also spark trading action today. In Canada, Valeant may remain active as traders digest yesterday’s 25% gain. Sun Life disappointed on earnings but raised its dividend.
Chart Signals: GBP and UK 100 rally while SPX forms a double top
We’re getting a lot of mixed signals across world markets today. The UK is attracting renewed interest with the UK 100 rallying after calling off a head and shoulders top and Cable testing $1.3000. Meanwhile, US indices continue to show signs of topping particularly the SPX 500.
North American and European Indices
US 30 continues to roll over. The index has dropped back under 21,000 falling into the 20,890 to 20,930 zone with next potential support at the 50-day average near 20,800. RSI falling toward 50 indicates a downturn pending.
US NDAQ 100 has encountered resistance near 5,690 and is consolidating recent gains just below that level. RSI overbought and levelling off indicates upward momentum slowing and the potential for a correction. Initial support possible near 5,655 then 5,625.
UK 100 continues to climb with support moving up toward 7,300 from 7,260 and the index advancing on 7,370. Rising RSI confirms increasing upward momentum. Next potential resistance near 7,400 then 7,440 near previous highs.
Germany 30 has levelled off near 12,750, having dropped back from 12,895 resistance. RSI near overbought indicates potential for a rest stop or a correction. Next potential support near 12,610 then 12,515 in a pullback.
Gold appears to be levelling off in the $1,210 to $1,230 area, trading near $1,222. RSI levelling off near 30 suggests the recent selloff may be nearing an end as selling pressure eases. Initial resistance on a rebound possible near $1,240 with additional support possible near $1,200.
Crude Oil WTI continues to stabilize between $45.00 and $47.00 with the price recently trading near $46.20. Additional resistance possible near $47.70 a Fibonacci level. RSI back above 30 indicates recent downswing ending as selling pressure eases.
USDJPY has paused for a rest near 114.00, consolidating the rally of the last two days and working off a slightly overbought RSI. Support moves up toward 113.35 a Fibonacci level from 113.00. Next resistance appears near 114.35 then 114.60 and the 115.00 round number.
EURUSD has found support near $1.0860 and appears to be stabilizing between there and $1.0900. So far this appears to be a pause within a downswing with resistance falling from $1.1000 toward $1.0930. Next support possible at the 200-day average near $1.0820 then the 50-day average near $1.0740.
EURGBP remains under distribution with the pair falling away from 0.8500 confirmed by the RSI falling away from 50. The pair has dropped into a 0.8385 to 0.8425 range between two Fibonacci levels with next support possible near 0.8340 and 0.8300.
GBPUSD remains under accumulation with support moving up toward $1.2940 from $1.2900. The index continues to struggle with $1.3000 round number resistance with its next test closer to $1.3150. RSI suggests a normal consolidation phase within an uptrend underway.
USDCAD is holding steady near $1.3700 having dropped back from $1.3800 resistance. RSI back under 70 from overbought suggests a trading correction starting. The pair remains in an uptrend above $1.3640 support.
CADUSD continues to attract support above $0.7270 a Fibonacci level, base building between there and $0.7330 with next resistance possible near $0.7380 also a Fibonacci level. RSI back above 30 indicates the recent selloff was overdone and a trading bounce has started.