Currency markets are also mixed today with gold and EUR bouncing back a bit, GBP and JPY levelling off and CAD down slightly. Gold is up 0.5%, copper is down 0.9%, crude oil is flat and natural gas is down 1.9%.
It feels like markets are pausing with some momentum traders taking profits as very hawkish Fed expectations get priced into the market and with the Dow having approached 20,000.
I think what has been really driving the big market moves of recent weeks is that a lot of business had put off decision-making until after the election and a lot of investors had been sitting on cash through the election campaign. The decisive result broke a logjam and since then, business have been getting on with decisions. Meanwhile, institutions have been plowing money into the market ahead of year end not wanting to show a huge stockpile of cash when US indices are up over 10%. Individual investors have been putting more money into funds as well, increasing demand for stocks and other investments.
It remains to be seen how long this rally can last. Although we may see intraday swings now and again, traders appear to be inclined to keep the markets up through the holidays maybe into early 2017. I suspect, however, that the earnings season that starts mid-January could be rough with the impact of the higher USD likely to inspire another round of whining and guidance cuts from Corporate America. Recall this time a year ago companies were complaining about the negative impact of the higher dollar on exports and the earnings of overseas operations and note that the Dollar index is higher now and still rising.
Heading into the weekend, there have been a number of announcements but they are mainly second tier in nature such as consumer confidence and trade data from a number of countries. US housing data is of particular interest following a positive industry survey yesterday. The big question facing the markets is whether traders are looking to take profits or add to positions ahead of the weekend.
On Monday the US electoral college is scheduled to vote to complete the election process. This is usually a formality but US electors have apparently been inundated with thousands of emails, petitions from celebrities and individual Democrats asking them to deny Donald Trump the presidency by breaking their oaths, rejecting the will of the people they have been appointed to represent and voting for someone else. They may find 2 or 3 faithless electors but finding the 30 or so votes needed to overturn the election looks very slim at this point. Still, the vote could spark another round of trading either from relief on confirmation of the results or shock if there is a surprise rejection. Most likely it will blow over just like the recount challenges from the Green Party.
The main event next week is the Bank of Japan meeting. The Yen has been crushed on expectations the BoJ will maintain or increase stimulus in 2017 while the Fed cuts back stimulus. Recent Japanese economic data has been improving however, likely at least in part to their currency decline so the Bank of Japan may not be under as much pressure to go full throttle on stimulus. This meeting could keep trading interest in the Yen high for the next several days.
There have been no major corporate announcements this morning.
UK CBI orders 0 vs street (5)
UK CBI selling prices 26 vs street 20
Eurozone trade balance €20.1B vs street €29.0B
Eurozone consumer prices 0.6% as expected
Eurozone core CPI 0.8% as expected
NZ ANZ consumer confidence 124.5 vs previous 127.2
Singapore exports 11.5% vs street (2.7%)
Singapore electronic exports 3.5% vs previous (6.0%)
Upcoming significant economic announcements include:
8:30 am EST US housing starts street 1,230K
8:30 am EST US building permits street 1,240K
12:30 pm EST FOMC Lacker speaking
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Chart Signals: Signs of peaking appear in the US Dollar
The mighty greenback’s relentless drive higher is finally showing some signs of relenting, or at least pausing which has enabled some currencies like Gold, EUR and JPY to climb up off the mat a bit.
North American and European Indices
US 30 is trying to stage a rebound but remains mired in the 19,860 to 19,900 area short of 19,940 and 20,000 resistance. RSI remains really overbought indicating high potential for a correction with initial support near 19,780 then 19,620.
US SPX 500 is consolidating recent gains between 2,260 and 2,268 with more resistance possible near 2,278 and next support possible near 2,250 then 2,244 the low end of the current trading range.
US NDAQ 100 is still stuck between its 4,900 breakout point and the 5,000 round number trading between 4,930 and 4,960. RSI still increasing indicates this as a pause within a larger uptrend.
UK 100 continues to climb retaking the 7,000 round number and advancing on 7,040 with support rising toward 6,990 from 6,925. Rising RSI confirms upward momentum increasing. Next potential resistance near 7,110 on trend.
Germany 30 tested its highest level in over a year, testing 11,445 before sliding back into the 11,390 to 11,410 area above 11,350 prior support. Next potential resistance near 11,500 then 11,600. Overbought RSI suggests potential for a pause.
Gold finally has found some support near $1,120 and has bounced back up into the $1,132 to $1,136 area with next potential rebound resistance near $1,145. RSI remains oversold but it has been for quite a while now.
Crude Oil WTI is on the rebound, climbing from near $50.40 toward $51.20 with support rising toward $50.90. WTI appears to be settling into a $49.00 to $53.00 trading range with higher lows indicating underlying accumulation remains intact through trading swings.
US Dollar Index peaked near 103.60 and has dropped back toward 103.00 to consolidate recent advances. A negative RSI divergence indicates upward momentum peaked and has started to fade. Next correction support possible near 102.50 then 102.00.
USDJPY has paused just below 118.60 trading between 117.90 and 118.40. RSI remains extremely overbought while a negative divergence suggests the recent uptrend may be peaking. Initial correction support possible near 116.90 then 116.00 and 115.00.
EURUSD found support near $1.0360 and has staged a relief rally up into the $1.0430 to $1.0470 area. It needs to retake $1.0500 to signal an upturn but a positive RSI divergence and head and shoulders bottom in the RSI suggest momentum turning.
EURGBP is pretty much sitting on 0.8400 with flat RSI confirming sideways momentum. The pair continues to consolidate recent declines in the 0.8260 to 0.8460 range between two Fibonacci retracements and above its 200-day average near 0.8315.
GBPUSD held its 50-day average near $1.2400 and channel support near $1.2355 and has bounced back up toward $1.2445. On a rebound initial resistance may appear near $1.2500 then $1.2555 its recent breakdown point.
USDCAD was unable to hold above $1.0400 and has dropped back into the $1.3340 to $1.3380 above the 50-day average after peaking near $1.3420 with more resistance possible near $1.3500. Next potential support in a pullback near $1.3300 a Fibonacci level.
CADUSD is having an inside day digesting Thursday’s big selloff but this appears to be a dead cat bounce with the pair unable to retake $0.7500 and the 50-day average while the RSI under 50 signals a downturn in momentum. Next support possible near $0.7480 then $0.7455 with initial resistance near $0.7510 then $0.7535.