Market Overview
Although the dollar is picking up again this morning, it is becoming apparent that markets have become somewhat stymied in a lack of direction in the past few days as a range of contrasting factors seem to be aggregating to leave traders somewhat bereft. The perception of political risk in the Eurozone has elevated with the French presidential election coming into focus along with questions once more arising over Greece and its debt. This is a drag on the euro and subsequently dollar supportive.
However at the same time there is an increased appetite for safe havens from Donald Trump’s protectionist movements, which is seeing the yen, gold and also importantly US Treasuries being bought. The fall in Treasury yields is a problem for the dollar which tends to correlate closely with the direction on yields. This is subsequently limiting to the dollar rally. All that and add into the mix, equity markets which have been becalmed despite a positive earnings season in the US. This is a frustrating time for traders seeking direction.
Wall Street was again all but flat on the day with the S&P 500 just 2 points (+0.1%) higher to 2295. Asian markets show similar lack of direction, with mixed moves as the Nikkei unwound the previous sessions gains, falling by -0.5%. The European markets have a slight positive bias today but nothing of any real note yet. The forex markets are showing the dollar up mildly across the forex majors, although once more simply unwinding the previous day’s losses. The New Zealand dollar is a big mover today in the wake of the Reserve Bank of New Zealand monetary policy decision. The BNZ kept interest rates on hold at +1.75% and the statement suggested that the policy would remain accommodative for a “considerable period”. Seen as jawboning the Kiwi has dropped as a result and continues to underperform this morning. Gold and silver are mildly lower with the dollar rebound, whilst oil is around 0.8% higher in the wake of yesterday’s afternoon rally.
Once again there is very little on the economic calendar that will discernibly move markets today. The comments from the RBA’s Governor Lowe at 0900GMT will be watched for an impact on the Aussie. However there is very little of any significance until the US weekly jobless claims this afternoon at 1330GMT, which are expected to tick marginally higher to 249,000 (from 246,000 last week). There will also be focus on the FOMC’s Charles Evans (leans dovish) tonight at 1810GMT, whilst the Bank of England’s Governor Mark Carney is also speaking at 1830GMT.
Chart of the Day – Silver
Silver continues to trend higher in its recovery. There is an uptrend channel in place since mid-December and the market continues to hug the resistance of this channel in the move higher. The Bollinger Bands remain bullishly configured and do not suggest that the trend is getting away from itself, whilst the momentum indicators are strongly configured. The RSI and MACD lines are all breaking to multi month highs and whilst the RSI is up towards 70, the strength of the trend remains a bullish factor that shows corrections continue to be bought into. The next resistance band between $17.85/$17.95 is now set to be tested and a successful break to the upside would open the way back towards $19.00 again. The hourly chart shows strong configuration on momentum and a succession of higher lows. The support is now strengthening between $17.50/$17.65, whilst the big support remains the medium term breakout above $17.20. Look to buy into today’s weakness.
The weaker dollar started to play a factor once more as the pair found some support at $1.0638. However there will need to be a considerable recovery now to suggest that yesterday’s positive close on the euro will be the start of a bull move. The momentum indicators are now a corrective drag on the pair with the Stochastics falling sharply and the MACD lines also crossing lower. It is though important to point out that the euro has not yet broken below an old key higher low within the trend higher yet and until it does so, the outlook will need to be considered to be a consolidation play. The lows of mid to late January need to be watched with $1.0617 the initial support, whilst the low at $1.0577 would be a support that confirms is it were to be broken. The hourly chart shows that the old pivot at $1.0710 is again playing a role as a basis of resistance whilst hourly momentum is also negatively configured. The way the market reacted yesterday reflects how the pair may now move into a phase of choppy consolidation, with a slight negative bias.
Sterling has found some support in the past couple of days as the market has bounced back above the mid-range support at $1.2430. this comes as the market seems to be struggling to find decisive direction. The candlestick bodies have been quite small in the past few days, which gives a rather uncertain feel to the market, whilst the momentum indicators have also taken on a more indecisive configuration. Today’s early drop lower again only adds to the mixed outlook. This is also all reflected on the hourly chart with the moving averages all flat and momentum indicators lacking conviction. Resistance around $1.2550 seems to be limiting the near term move, whilst this is below the pivot at $1.2600. The bulls will point to this all taking place back above the old key support at $1.2430 which is back in play as support. The spike low at $1.2345 is key support now.
The break below 112.50 has opened renewed downside. The old support has now become new resistance as the market has struggled in a consolidation to break back above 112.50 in the past few days. There is a near term consolidation that has formed with each of the past three completed candles all trading within a few pips of support at 111.60 and resistance at 112.50. The trend lower and bearish configuration on the momentum indicators suggests that the next break will again be to the downside, but for now a support is in place. An old pivot around 111.30 is the next key support. The hourly chart shows that the outlook remains negative with the momentum indicators bearish. The hourly RSI continues to show the rallies are being sold around 60 and the hourly MACD lines are negatively configured. The overhead supply between 112.50/113.45 suggests that even if there were to be a brief pop to the upside, a rally would struggle. I am a seller into strength.
Gold
The bulls remain in control as corrective moves continue to be bought into. The near term trend over the past couple of weeks remains strong and the market posted another bull candle that put gold back into a test of the next overhead supply area between $1241/$1251. The RSI around 70 may be a touch restrictive but weakness continues to be seen as a chance to buy. The hourly chart shows an uptrend channel over the past couple of weeks with a series of higher lows and old breakouts seen as supportive. The near term support is now strong between $1225/$1230 with initial support this morning at $1236, whilst hourly momentum remains bullishly configured with any unwinding of the hourly RSI to 40/50 seen as a buying opportunity. The bulls now have a challenge to breach $1251 but a successful upside break would re-open upside towards $1300 once more.
WTI Oil
The massive spike in Tuesday’s API oil inventories seems to have prepared the market which saw the crude oil inventories in the EIA report also spike (to +13.8m barrels versus an expected +2.5m barrels). Despite this, the market moved higher with a focus on the gasoline inventories which showed a surprise drawdown of -0.9m barrels (+1.5m expected). With the bullish candle formed yesterday as a result, the choppy range play of the past few weeks subsequently continues. A low at $51.22 has now been posted above the $50.90 and $50.70 key lows from January to help reinforce the range support. The daily momentum indicators continue to reflect a lack of decisive direction. On the hourly chart, the bulls have to breach a minor near term band of resistance $52.25/$52.65 today with the range resistance growing again at $53.50. Continue to play the range.
DISCLAIMER: Any views or opinions presented within this e-mail are solely those of the author and do not necessarily represent those of Hantec Markets Limited, unless otherwise specifically stated. The content of this message does not constitute investment advice.