This article was last updated on April 16, 2022
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Stock markets around the world are mixed today as the US and UK return to trading. US index futures are down slightly while indices in Europe are trading lower with The FTSE and CAC down 0.4% and the Dax down 0.1%.
Gold and the Japanese Yen are consolidating recent gains at higher levels as political risk continues to rise. President Trump returns from his overseas trip to continuing domestic turmoil.
In Europe, Greece is back in the headlines with the country’s creditors moving the goal posts on what is needed to unlock bailout funds ahead of July debt repayments. Meanwhile, signs of a political unrest have grown in recent weeks amid multiple national strikes, regular police who haven’t been paid facing off against riot police, and medical equipment being stolen from hospitals because there isn’t enough money to pay for security just to name a few examples.
It’s one thing to ask governments to act responsibly and stay on top of their debts and another to unleash a multi-year depression, create extensive human suffering and put a nation in chains to order to meet uncertain standards. Greece could be ripe for a revolution this summer and nobody seems to be paying attention with the EU wanting to paper over the problems until next summer.
Meanwhile in Italy, where an election needs to be held by May 2018, calls for an early election are growing to clear the air with concerns growing the country’s fragile banking system could come under pressure again after the German election.
Crude oil is down 0.4% for WTI this morning on limited news but natural gas has been hammered for a 3.6% loss.
The US dollar and Fed speculation may ramp up today, as the June 14 decision on whether to raise interest rates again looms. Overnight St. Louis Fed President Bullard indicated the jury remains out on whether the Trump Administration can meet high market expectations. Dallas Fed President Kaplan, a voter this year, indicated earlier today he still expects two more rate hikes this year. With the budget battle likely to derail September, this suggests June remains likely. This morning Core PCE inflation is out, a measure the Fed uses.
Comments from Fed Governor Brainard may also attract significant attention. She is one of the most dovish members of the Fed. Her comments may indicate whether the doves have thrown in the towel and accepted a potential June rate hike or if they are planning to take a stand.
In stocks today, Kinder Morgan could attract attention as a deal between the Green Party and the NDP to form a coalition government puts the company’s Trans Mountain expansion project in jeopardy. Kinder Morgan is trying to complete an IPO of its Canadian business. A steep jump in political/regulatory risk means investors could demand a much lower price and could cause the offering to fail. In other news, Bank of Nova Scotia wraps up bank earnings season with a very strong report.
Chart Signals: Indices wobble, Pound on the rebound
Indices in the US and Europe continue to struggle making headway although they haven’t broken down to date either. A descending triangle in the Germany 30 and a double top in the US 30 suggest the recent bull trend may have peaked. Meanwhile, gold and JPY remain well supported. GBP is starting to bounce back while EUR has been sliding as the balance of risks shifts back to the continent from the island nation.
North American and European Indices
US 30 is falling back after a failure to break out over 21,130 resistance put a big double top into place. RSI continues to trend lower indicating weakening upward momentum. Initial support tests possible near 21,000 then the 50-day average near 20,780.
US SPX 500’s advance stalled near 2,418 and the index has dropped back toward 2,410. RSI rolling down from a lower high indicates upward momentum slowing and a correction possible with initial support near 2,400 then 2,380.
US NDAQ 100 is still struggling with 5,800 resistance while a lower high in the RSI and a negative divergence suggest upward momentum has peaked. Initial support possible near 5,695 a 23% Fibonacci retracement of the recent upleg.
UK 100 ran into resistance at 7,550 and has started to drop back, falling toward 7,510. A lower high in the RSI and a negative divergence suggest upward momentum has peaked and a correction possible with initial support near 7,500 then 7,450.
Germany 30 appear to be under distribution, falling away from a double top near 12,900, trading near 12,600 and forming a bearish descending triangle above 12,475. Next potential support at the 50-day average near 12,355. RSI approaching 50 from above indicates confirmation of a downturn pending.
Commodities
Gold is consolidating recent gains in the $1,260 to $1,270 range holding well above its $1,.256 recent breakout point. Flattening RSI suggests sideways momentum emerging.
WTI is sitting on its 50 and 200-day average just above $49.00 near the middle of an emerging $47.85 to $51.55 trading range. RSI sitting on 50 confirms a consolidation phase underway. Initial resistance near $50.00 with initial support near $48.50.
FX
US Dollar Index continues to form a saucer bottom between 96.65 and 97.75 with next potential resistance near 98.10. RSI near 40 indicates downward pressure easing but not totally gone.
USDJPY is trading near 11.00 testing the bottom of a 110.65 to 112.15 Fibonacci trading range. RSI failing to retake 50 and falling again indicates the broader downtrend remains intact and is resuming. Next support possible in the 110.00 to 110.20 area between a round number and the 200-day average.
EURUSD remains below $1.1200 as it retreats from a recent high near $1.1260. RSI falling away from 70 confirms a correction starting. Initial support near $1.1095 1 23% retracement of the recent uptrend has held so far with next support if that fails possible near $1.1000.
EURGBP peaked recently at another lower high near 0.8735 and has turned downward again falling toward 0.8680 with next potential support at the 200-day average near 0.8600 then the 50-day average near 0.8535. RSI topping near 70 and falling indicates recent upswing has peaked and a downturn starting.
GBPUSD is starting to bounce back having held above $1.2800 and its 50-day average to keep its underlying uptrend intact. The pair has advanced on $1.2870 with next potential resistance near $1.2930 its recent breakdown point.
USDCAD has confirmed support near $1.3400 and is starting to turn back upward on both the pair and the RSI to suggest the recent downswing has ended and a bounce starting. Support has moved up toward $1.3450 with resistance possible at the 50-day average near $1.3500 then $1.3545.
CADUSD remains under distribution falling away from a lower high near $0.7465 and falling back toward $0.7425 to continue a falling channel. RSI falling away from 70 confirms the recent bounce has ended and a downtrend resuming. Support tests possible near $0.7410 the 50-day average then $0.7380.
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