Market Overview
Forex traders seem to be sitting on their hands now as the major pairs consolidate ahead of a raft of key economic data releases in the coming days but also the first Congressional testimonies from the new Fed chair, Jerome Powell.
It seemed as though yesterday’s moves were something of a false start as initial dollar weakness was pegged back. However this seems to be a market ready to drive renewed selling through the US dollar, but it is just waiting for the next trigger signal. Will this come from Jerome Powell today? The latest head of the FOMC has not even chaired his first monetary policy meeting yet but today testifies before the House Financial Services Committee.
His views on inflation and the balance sheet will be especially interesting, but given that Powell has a record of never having dissented against former Chair Yellen, it seems unlikely that there will be any significant surprises. This may limit any potential dollar recovery and re-engage the dollar selling pressure, driving gold higher and continue the equity markets recovery.
Wall Street closed hugely impressively again with the Dow almost 400 ticks higher +1.6%, whilst the S&P 500 +1.2% higher at 2780. Asian markets were broadly higher with the Nikkei +1.1%. Once more, despite gains in the European markets early today, it seems likely that they will be lagging the performance of Wall Street.
In forex markets there is a mix of moves, with little really decisive to note in front of Powell’s testimony this afternoon.
In commodities, gold is consolidating and oil is also around the flat line as the bulls consolidate yesterday’s late gains.
From the economic calendar, there is a raft of US data to drive markets in the afternoon. The US core Durable Goods Orders are at 13:30 GMT which are expected to show growth of +0.4% for the month (+0.7% last month). The S&P Case Shiller House Prices Index is at 14:00 GMT and is expected to show a slight slip to +6.3% (from +6.4%). The Conference Board’s Consumer Confidence is at 15:00 GMT and is expected to show another strong reading of 126.6 (up from 125.4 last month). The Richmond Fed Manufacturing is at 15:00 GMT and is expected to tick higher to +15 (from +14) after a couple of months of recent declines.
Aside from the US data, the market will be interested in the prelim German inflation data at 13:00 GMT which is expected to slip to +1.3% for the HICP (from +1.4% last month).
Chart of the Day – EUR/CAD
The euro has held up relatively well across the forex majors, whilst the Canadian loonie has been losing its way. Subsequently we have seen the EUR/CAD pair pushing higher in recent weeks. This move higher comes within an uptrend channel which has been dragged the market higher now for several months. The February breakout above 1.5370 was the key move on the longer term basis which has opened for a push towards a test of the 2016 highs 1.59/1.61. Within the context of recent trading, therefore any weakness needs to be seen as a chance to buy. A retreat within a smaller 6 week uptrend was bought into yesterday with a strong bull candle and a push above last week’s high of 1.5685 would re-open the upside once more. There is now support at 1.5515, whilst the momentum indicators remain positively configured. The RSI continues to show the buyers willing to return around 60, whilst the Stochastics are also strongly configured. The MACD lines are a little bit of a concern for the bulls and need to be watched as they have just lost some impetus in recent days. On a medium term basis so, any unwind back that finds support above 1.5370 will be seen as an ideal chance to buy now.
It had looked yesterday as though the euro bulls were ready to breakout once more, but it was a bit of a false start. The market found a positive session but the candlestick was not entirely convincing from the perspective of the bulls. That means the consolidation of the past few days continues. There is still a very slight positive bias to the move, with a succession of very marginal higher lows in the past couple of sessions, whilst the market is again trading slightly higher today. This remains a market in need of a catalyst, with the momentum indicators having plateaued. The catalyst could come from Jerome Powell today, or the key inflation data from both the US and Eurozone in the next couple of days. The hourly chart continues to show $1.2360 as a key near term resistance with a breakout completing a small base pattern. The support is at $1.2260 and now yesterday’s low at $1.2275.
It was a good battle for control yesterday which yielded no overall control. The early sterling gains were pegged back into the afternoon to leave another very neutral candle, and interestingly enough another early move today steeped in uncertainty. This is though coming at the support of a six week uptrend which today supports at $1.3910. The bulls will be concerned that once more they could not hold on to a move above $1.4000 which continues to be a pivot on a closing basis. Resistance has now been left at $1.4070. The hourly chart shows a choppy market in recent days but retaining a ranging configuration. Yesterday’s support at $1.3925 needs to be watched as it now protects the latest key low at $1.3855.
Rallies continue to look to be a chance to sell on Dollar/Yen. The overhead supply between 107.30/108.30 is housing a considerable source of selling pressure and the market remains negatively configured for further downside to retest 105.50. An uncertain candlestick formation from yesterday left a high almost bang on the 107.30 resistance but equally the sellers failed to really ignite. The daily momentum indicators are still negatively configured and suggest the recent rebound is a chance to sell. The seven week downtrend comes in at 107.85 today and whilst the hourly chart shows a slightly rangebound configuration of the past few days, there is still a bearish bias to the chart. Initial support at 106.35 with 107.30 initially restrictive.
Gold
The gold bulls did not quite have the strong session they were hoping for, but it still seems as though weakness remains a chance to buy now. The daily momentum indicators retain their positive medium term configuration and the market is beginning to pull higher lows and higher highs again. Holding on to the support at $1320.60 is key, but yesterday’s higher low at $1326.60 will take on added importance the longer it lasts for. The hourly chart shows that $1332 was a near term base pattern breakout which implies $1344 but is also a basis of support now as the market as unwound. Initial resistance is at $1341 now. The hourly chart has taken on far more of a positive configuration with the hourly RSI supportive above 40 and hourly MACD lines holding above neutral.
WTI Oil
The strong run of candles continues as a strong bull reaction into the close posted another positive session and continues to move back towards the highs. This suggests that the outlook continues to be a buy into weakness with the momentum indicators all showing continued recovery as the Stochastics accelerate higher and the MACD lines bull cross. The higher low at $60.75 is now a key level and there is a pivot of support around $62.85 that the bulls will be eying for their next opportunity. Trading above all the moving averages reflects the strength of the outlook and the bulls remain in control despite yesterday’s little slip. The hourly chart shows there is a near term “buy zone” around $62.35/$62.85 and the hourly RSI around 40 is a decent area for the bulls now. Initial support at $63.10.
The Dow bulls have started the week where they left off, with another impressively strong candle. The move above resistance at 25,432 now means that the market has pushed to its highest in the recovery since the huge volatility of the 1000 tick sell-off days. Momentum indicators are rising strongly now with the MACD lines having now crossed higher, the RSI rising above 50 and the Stochastics with a bull kiss higher. There is an gap still open at 25,314 from yesterday’s jump at the open, but the bulls seem intent on running with this move. This gap will though now provide a basis of support for a correction between 25,314/25,382, however the support of 24,793 is now the key higher low and the bulls will be looking to build on this with a succession of higher lows. Trading clear of the 61.88% Fibonacci retracement of the sell-off at 25,372 now means that the market is open for continued recovery towards 76.4% Fib at 25,848.
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