This article was last updated on April 16, 2022
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Overseas stock markets have been trading flat to up slightly overnight but the big news has been in the US where the S&P 500 and NASDAQ 100 have broken out to new all-time highs overnight, calling off double tops and showing that the bull market still has some legs left despite political turmoil.
Yesterday’s Fed minutes which showed Fed members see the soft Q1 as transitory and indicated planning on how to start running down the Fed’s balance sheet is underway, was seen as staying the course. This has been echoed from Fed member speeches this week which have indicated continued plans for two more rate hikes this year, keeping June on the table with September likely off the table due to the upcoming budget battle. Today, Fed Governor Brainard, one of the most dovish members of the panel is scheduled to speak. She could throw a monkey wrench into rate hike speculation, or hint that the doves have thrown in the towel on June, either of which could have a significant impact on trading in stocks and currencies. So far, USD is trading up a bit against other majors as June rate hike speculation regains momentum.
Oil has come under pressure this morning with both Brent and WTI trading down 1.7% with losses accelerating. Reports indicate that OPEC has agreed to a nine month extension to current production cuts running through March 2018. A nine-month extension had already been priced in by the recent rally so traders appear to be taking profits against the news. Traders who had speculated on deeper cuts may also be unwinding their position. OPEC is scheduled to meet with Russia and other non-OPEC countries later today where a nine-month extension to the non-OPEC cuts is also expected.
CAD is down slightly today, but not much compared with the oil price drop as the depressed Loonie continues to attract support from Wednesday’s Bank of Canada meeting. JPY has been underperforming other majors so far today with the rest down a similar amount of about 0.1%-0.2% against USD.
It’s a big day for Canada bank earnings. Results have come in a lot stronger today with TD, CIBC and RBC all beating the street by wide margins. Bank of Montreal dropped yesterday after missing expectations but raising its dividend. Today, we will see if traders are ready to respond to good news from the big banks or not.
Chart Signals: Unconfirmed breakouts for SPX and NDAQ, WTI under pressure
It’s a good news bad news kind of morning for US indices. The SPX and NDAQ have broken out to new all-time highs while the Dow failed to overcome resistance. RSI indicators for both are not confirming the breakouts and negative divergences are emerging. Today’s trading may indicate if these are true breakouts or head fakes. Meanwhile, WTI has resumed its downtrend after failing at a lower high.
North American and European Indices
US 30 is testing 21,230 resistance today, but has been unable to get through so far, dropping back toward 21,075. It has regained 21,000 and RSI suggests momentum is starting to turn back upward. Next measured resistance on a breakout possible near 21,360. .
US SPX 500 is breaking out today, clearing 2,400 and advancing on 2,410. RSI, however, is still in a downtrend which is needs to break out of to confirm the upturn. Next measured resistance possible near 2,422 with initial support near 2,380.
US NDAQ 100 is breaking out today, clearing 5,725 to a new all-time high, cut the RSI has failed to confirm, a negative divergence that suggests upward momentum slowing. Next measured resistance possible near 5,815 with initial support near 5,700 then 5,635.
UK 100 has dropped back toward 7,500 after running into resistance near 7,545. The RSI is not confirming recent advances suggesting upward momentum is slowing and a 7,450 to 7,550 consolidation range emerging.
Germany 30 is still struggling to make further ground trading between 12,540 and 12,720 still well below its recent high near 12,900. RSI setting a lower high and testing 50 suggests a downturn pending. Next potential support at the 50-day average near 12,335.
Commodities
Gold continues to consolidate recent gains between $1,245 and $1,265 recently trading near $1,260. RSI steady just above 50 indicates this as a normal consolidation within a bigger uptrend. Next potential resistance near $1,272.
WTI is rolling over today after failures at lower highs for both the price and the RSI indicate the recent upswing has ended. The price has dropped back from $51.75 resistance back toward $50.35. $50.00 has held so far but if it fails, next support may not appear until $49.25 where its 50 and 200-day averages converge.
FX
US Dollar Index has stabilized near 97.00, trading between 96.70 and 97.40 with next rebound resistance possible near 97.80. RSI suggests downward momentum levelling off.
USDJPY is testing the top of its 110.65 to 112.15 trading range today recently trading near 111.75. RSI advancing on 50 indicates an upturn in momentum pending. Next potential resistance on a breakout near 113.00 then 113.35. Initial support has moved up toward the 50-day average near 111.25.
EURUSD has paused near $1.1200 trading between $1.1155 and $1.1275 while consolidating recent gains and working off an overbought RSI. So far this appears to be a normal pause within an uptrend.
EURGBP is still steadily climbing, trading near 0.8660 within a 0.8600 to 0.8675 range above its 200-day average. RSI suggests upward momentum levelling off but underlying accumulation intact.
GBPUSD continues to struggle with $1.3000 resistance trading near $1.2660. It remains in an uptrend above $1.2910, but falling indicates upward momentum is slowing toward neutral.
USDCAD found some support near $1.3385 and has bounced back up toward $1.3430. so far price action and the RSI suggest this is likely a common trading bounce within a bigger downtrend which remains intact below $1.3500 and its 50-day average.
CADUSD has encountered resistance near $0.7470 with more possible near the $0.7500 round number. The pair has dropped back toward $0.7445 in what looks like normal backing and filling following a rally. It remains in an upswing above its 50-day average near $0.7410.
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