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Commodities Pounce On USD Weakness
00:00, 15 March 2013
Global markets have been mixed overnight. Asia Pacific markets rallied as the Aussie 200 roared back from a one-day correction and the Japan 225 rallied on the confirmation of Haruhiko Kuroda as the new Governor of the Bank of Japan. This renewed speculation that monetary stimulus could be accelerated. European indices have retreated a bit on normal backing and filling ahead of index weighting changes and the weekend. Indications out of the EU Summit suggest that politicians appear to be slowly recognizing the need to shift their orientation toward investment and growth following the rejection of austerity in last month’s Italian election combined with extremely high and rising unemployment in countries like Greece, underscoring austerity’s failure. With Italy still in flux politically and German facing an election this fall, it may take some time for this shift to play out. US indices have been quiet this week, although support remains intact, US markets appear to be losing steam and possibly entering a period of consolidation. The S&P 500 still stubbornly refuses to break through the barrier set by its 2007 high. Commodities, meanwhile, are on the rebound today, led by a big bounce for UK crude oil and smaller increased for US crude and copper. With gold and silver also up a bit, part of this appears to be due to USD weakness but also can be attributed to speculation that the political pendulum increasingly swinging toward stimulus could boost future resource demand. Currencies also have been taking advantage of USD weakness, particularly CAD and GBP which had become perhaps the most depressed majors of late. EUR, SEK and NOK are also rebounding strongly while JPY, AUD and NZD are having a quiet finish to an active week. US banks appear likely to be active today after the Fed released results of stress tests on the capital plans for 18 US banks. It stated no objection for 14 banks plans, several of which indicated afterward that they are now considering significant dividend increases including Bank of America, American Express, Capital One, Wells Fargo and others. The Fed did not object to plans from JPMoganChase and Goldman Sachs but ordered them to address weaknesses in their capital planning processes and submit new plans by the end of September. It objected to the plans from Ally Financial and BB&T. Economic News Significant economic announcements released overnight include: NZ Business PMI 56.3 vs previous 55.2 There are no major releases in Europe on Friday. US Empire manufacturing 9.2 vs street 10.0 US consumer prices 2.0% vs street 2.0% vs previous 1.6% US industrial production 0.7% vs street 0.4% Economic announcements due later today include: 9:55 am EDT US consumer confidence street 78.0 North American indices US30 is holding above 14,500 and trading near although an over bought RSI and negative divergence suggest upward momentum slowing and the risk of a correction back toward 14,400 or 14,325 keeps increasing. SPX500 is so close to breaking out it hurts. A move though 1,565, particularly on a weekly close would signal a new upswing with next measured resistance near 1,575 then 1,590. Initial support has moved up toward 1,550. NDAQ100 keeps hovering between 2,785 and 2,815 consolidating its recent breakout with next measured resistance near 2,860. US SmallCap 2000 is consolidating yesterday’s rally near 950 with next measured resistance near 975 and support moving up toward 945. Canada60 bounced up off of 730 yesterday and has started to advance once again within its 725-745 trading channel. European Indices UK100 touched a new high in early trading but has slumped back under 6,500 while RSI has started to roll over suggesting that a correction may be underway where 6,440 could be retested. Germany30 has paused near 8.050 today trading in limbo above 8,000 but below its 2000 and 2007 highs near 8,125. France40 ran into resistance near 3,880 and has dipped back toward 3,840. It remains in an upswing above 3,800 with next measured resistance near 4,000. Italy40 is consolidating its downtrend and 16,000 breakouts near 16,100 today. Breakouts by the index through 16,250 and the RSI through 60 remain necessary to confirm the start of a new upswing that could carry toward a retest of 16,350 or 16,700. Spain35 may be running out of gas. It stalled near 8,675, short of its 8,750 channel high at the same time a negative RSI divergence appears suggesting upward momentum fading. Initial support appears near 8,480 then 8,340. Commodities today Gold has been taking another run at $1,600 where a breakout would complete an ascending triangle base. A new upswing could carry toward a retest of $1,625 or a measured $1,645. Initial support remains near $1,580. Silver continues to base build with an ascending triangle forming between $28.25 and $29.50. Copper continues to consolidate between $3.50 and $3.55 as it tries to muster enough interest for another advance. US crude is breaking out again today, taking out a downtrend line and confirming the completion of a reverse H&S base. Currently testing $93.50, next upside resistance appears near $94.00, $94.80 and a measured $97.00. UK crude is breaking out today driving up through $110.00 and smashing through a downtrend line. RSI climbing up out of a double bottom suggests upward momentum accelerating. Next resistance appears near $111.50 then $112.50. Gasoline has resumed its uptrend, rallying up from another successful test of $3.00 as support. Next upside resistance levels appear near $3.12, $3.20 and $3.40 on trend. Natural Gas is testing its 52-week high near $3.85 today with next resistance on a breakout near $4.10 and initial support in a correction near $3.65. RSI has become overbought but confirming rally so far. Cotton is soaring again today driving toward a test of 93.60 although an overbought RSI suggests a pause or a correction back toward 91.00 may be needed before it can press further ahead. FX this morning USDCAD is breaking down today, taking out $1.0230 to complete a descending triangle while falling RSI suggests momentum turning increasingly downward. Next support appears near $1.0190 then $1.0160 and $1.0100. EURUSD has bounced back above $1.3000 while RSI suggests momentum starting to turn upward again. Initial tests appear near $1.3150 then $1.3300. GBPUSD’s oversold bounce continues today as it runs up toward $1.5100. Initial resistance appears near $1.5200. Rising RSI momentum suggests a retest of $1.5324 still appears possible while still keeping its longer term downtrend intact.