This article was last updated on April 16, 2022
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Stock markets, particularly in the US have been looking exhausted lately. Having reached the end of the seasonally strongest time of the year for stocks, and entering a historically more volatile period, it’s been clear it wouldn’t take much to collapse this house of cards.
US index futures, the Dax, and the Nikkei are all down about 0.5%. Gold, Silver and the Japanese Yen, meanwhile are roaring back to life with the precious metals posting 1% gains. Meanwhile EUR and GBP also continue to climb. The FTSE is the top performing major index, holding steady on support from a very strong UK employment report.
A clear shift in capital looks underway with traders pulling money out of risk markets in general and the US in particular. Growing political turmoil in the US, increasing tensions in Asia, and easing uncertainty in Europe (for now) have a lot of traders rewthinking their political risk exposure.
In the US, the latest claims from former director Comey accusing President Trump of asking him to drop the investigation of former National Security Adviser Mike Flynn has ratcheted up political tensions even further. Whether any of the recent controversy and accusations will actually amount to anything remains uncertain.
What is clear, however, is that all of this sound and fury has created a toxic environment in Washington, making co-operation between the parties pretty much impossible. It also distracts the President away from his reform agenda potentially causing delays and changes.
Even if all of the current controversy blows over somehow, another set of storm clouds is brewing. There have been reports that NAFTA renegotiations could start in August, creating trade uncertainty. The potential need for the President to score a big win on something just ahead of a big budget battle and a likely government shutdown in September-October could make for tough talks.
Speaking of offshore issues, apparently the US aircraft carrier Ronald Reagan has left port in Japan while tensions with North Korea continue to rise. A few weeks ago its would have been laughable to suggest that Europe would become the most stable region, but it shows how fast things can sometimes change in politics.
Resource markets are also under pressure today. Australia’s index outpaced its peers to the downside falling 1.0%. Resource currencies like CAD and AUD have been falling off a cliff even underperforming the nosediving USD. Crude oil has been steady overnight but with API having reported a 0.9 mmbbl increase in oil stockpiles and traders expecting a 2.6 mmbbl decrease in the DOE report, oil could be volatile through the day today.
Chart Signals: US indices follow USD downward, Gold and JPY rebound
With the US dollar continuing to break down, US indices have started to turn downward as well, particularly the US 30 and US SPX 500. This has lifted the lid off of currencies that had been crushed in the post-election USD rally with gold, JPY and EUR breaking out of bases this week and Cable climbing toward $1.3000.
North American and European Indices
US 30 continues to roll over falling away from 21,000 into the 20,830 to 20,880 area. RSI nearing 50 where a break would signal a downturn in momentum. Next potential support at the 50-day average near 20,795 followed by 20,640.
US SPX 500 is starting to drop away from 2,400 double top resistance dropping into the 2,384 to 2,390 area. RSI falling toward 50 indicates upward momentum slowing and a downturn pending. Next potential support at the 50-day average near 2,370 then 2,350.
US NDAQ 100 is sitting on 5,700 having encountered resistance near 5,722. RSI remains really overbought and is starting to turn downward so the index looks vulnerable to a correction. Next support possible in a pullback near 5,635 a 23% retracement of the recent upleg.
UK 100 has paused just above 7,500 digesting its recent breakout over 7,450. Initial resistance appears near 7,535 its recent peak then a measured 7,550. RSI confirms upward momentum but is approaching overbought territory.
Germany 30 is starting to turn downward, falling under 12,800 and on toward the 12,750 to 12,770 area. RSI back under 70 signals a correction starting with next potential support near 12,690 then 12,640 and 12,600.
Commodities
Gold is still in rally mode with the price regaining $1,236 to complete a rounded bottom and then taking a run at $1,250 with support rising toward $1.245. RSI regaining 50 signals momentum turning upward with next potential resistance near $1,253 a Fibonacci level then $1,270. A golden cross of the 50 and 200-day averages is pending which if successful would confirm an uptrend underway.
WTI crude oil has paused to consolidate its recent rebound rally trading between $48.00 and $49.30 recently trading just below $9.00 where its 50 and 200-day averages converge. . The price is holding above $47.70 Fibonacci support while RSI regaining 50 confirms momentum turning upward with next resistance near $50.00.
FX
US Dollar Index remains under pressure, breaking down under 98.00 to confirm a downleg that started when it took out 98.40. RSI under 50 and falling confirms increasing downward pressure. Next measured support possible near 97.50 then a previous low near 96.90.
USDJPY is increasingly turning back downward breaking 113.00 and falling toward 112,30 with next potential support near 112.15 then the 50-day average near 111,65. RSI falling toward 50 where a break would confirm a downturn in momentum.
EURUSD continues to climb with support moving up from its $1.1000 breakout point toward $1.1080 and the pair advancing on $1.1115. Next resistance appears in the $1.1125 to $1.1145 area. RSI confirms increasing upward momentum but is approaching overbought territory.
EURGBP ran into Fibonacci resistance near 0.8625 and has been knocked back down toward 0.8560. The pair may be settling into a 0.8520 to 0.8590 range between its 50 and 200-day averages, above its 0.8500 recent breakout point.
GBPUSD is attracting renewed interest, rallying up from $1.2910 toward $1.2970 with a retest of the $1.3000 looming. Next potential resistance on a breakout near $1.3155 a 38% retracement of the previous downtrend. A recent golden cross of the 50-day average over the 200-day confirms an uptrend underway.
USDCAD has paused between $1.3600 and $1.3640 holding above $1.3570 Fibonacci support. RSI holding 50 suggests recent trading could be a correction within a larger uptrend. Initial resistance near $1.3660 then $1.3700 on a bounce.
CADUSD has levelled off between $0.7330 and $0.7360. RSI failing to retake 50 suggests this could be a trading bounce stalling short of Fibonacci resistance in the $0.7380 to $0.7410 zone. Initial pullback support possible near $0.7320.
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