Traders continue to respond positively to this week’s confirmation from the Fed that members are looking at two rate hikes this year rather than four, this news has knocked USD back, taking some of the forex pressure off of US companies which had impacted exports and earnings. Comments out of the ECB this morning indicating that last week’s rate cuts were necessary and that the central bank has more stimulus ammunition in its arsenal has helped to support stocks across the pond.
Crude oil continues to advance as well today with WTI crude regaining the $40.00 level for the first time in three months, providing more evidence to indicate that it has turned the corner amid falling US shale production and the potential for a producers’ meeting in April. Gains in crude has propelled oil sensitive currencies like CAD, NOK and RUB (which is also benefitting from a Bank of Russia decision to hold rates at 11.0%) to the top of the leader board. USD, meanwhile also appears to be stabilizing which has sparked a downward correction in gold.
Stocks in Canada have the potential to be particularly active today. In addition to the potential tailwind for oil stocks from the oil rally, a big acquisition by TransCanada overnight could spark action in the pipeline sector. Canada retail sales and consumer price inflation reports are due today which could give another indication on how Canada’s economic transition is going ahead of next week’s federal budget and how much pressure the Bank of Canada is under to cut interest rates again following Norges Bank’s cut earlier this week. We also get three Fed speakers today (Dudley, Rosengren and Bullard) who would be expected to confirm the Fed’s more dovish stance on interest rates.
Breaking News: CAD rallies on strong retail sales
Canada retail sales 2.1% vs street 0.6% and previous (2.1%)
Canada retail ex auto 1.2% vs street 0.4% and previous (1.7%)
Canada consumer prices 1.4% vs street 1.5% and previous 2.0%
Canada core CPI 1.9% vs street 2.0%
Canada retail sales stormed right back, a sign of an improving economy. Lower headline inflation could be partly attributed to the rebound in CAD over the last several weeks.
CAD is rallying on this news meaning traders think the Bank of Canada is likely to keep its benchmark rate at 0.50% for the foreseeable future. Rising WTI also continues to support the loonie, but traders should note it is starting to look overbought technically in the near term.
TransCanada agrees to acquire Columbia Pipeline group for $13B or $25.50 per share in a friendly all-cash deal, an 11% premium to yesterday’s closing price in Columbia’s shares.
Significant announcements released overnight include:
11:00 am AEDT NZ ANZ consumer confidence previous 119.7
7:00 am GMT Germany producer prices street (2.6%)
9:00 am GMT Norway unemployment rate street 3.3%
Upcoming significant announcements include:
8:30 am EDT Canada retail sales street 0.6%
8:30 am EDT Canada retail ex auto street 0.4%
8:30 am EDT Canada consumer prices street 1.5%
8:30 am EDT Canada core CPI street 2.0%
9:00 am EDT FOMC Dudley speaking
10:00 am EDT US consumer sentiment street 92.2
11:00 am EDT FOMC Rosengren speaking
1:00 pm EDT US Baker Hughes drill rig count previous 480
3:00 pm EDT FOMC Bullard speaking
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Chart Signals: Overbought RSIs indicate some rallies may be near exhaustion
Stocks and commodities continued to climb overnight, particularly WTI Crude oil which has regained $40.00, along with the US 30, US SPX 500 and CAD. Many of these markets are getting overbought on the RSI, however, suggesting they may be getting ahead of themselves increasing the potential for a pause or correction in the coming days.
North American and European Indices
US 30 continues to consolidate recent gains near 17,500 trading between 17,460 and 17,540. RSI getting overbought suggests potential for a pause or correction with next support near 17,400 then 17,325. Next upside resistance near 17,750.
US NDAQ 100 is still struggling with resistance at its 200-day average near 4,420. Rising RSI indicates underlying upward momentum intact through this pause with next upside resistance near 4,465. Support in place near 4,395.
US SPX 500 has levelled off near 2,040 while it digests recent gains and works off an oversold RSI Support in place near 2,025 and 2,015, with next resistance near 2,046 then 2,060 a Fibonacci test.
Germany 30 is bouncing around between 9,830 and 9,930. RSI suggests upward momentum may be levelling off while the index struggles with the 10,000 round number, but so far a reverse head and shoulders bottom still appears to be forming.
UK 100 remains under accumulation, clearing 6,200 and advancing on a test of its 200-day average near 6,260 with next resistance after that near 6,310 a previous high. RSI above 50 confirms upward momentum intact with support rising toward 6,190.
Gold has dropped back toward $1,250 after peaking at a lower high near $1.270. RSI falling toward 50 confirms upward momentum slowing and gold rolling over. Next potential support near $1,243 then $1,228 where the recent rally started.
Crude Oil WTI is breaking out again today clearing $40.00 and advancing on $40.50 with next potential resistance near $41.25 a 62% Fibonacci retracement of the downleg that started in October. Overbought RSI suggests it may need to pause for a rest soon.
US Dollar Index has stabilized just below 95.00 pausing to digest recent declines in the 94.60 to 95.20 range. It would need to clear 95.75 to call off the current downtrend.
EURUSD faltered near $1.1330 and has dropped back toward $1.1290 and into its $1.1255 to $1.1300 Fibonacci trading range. A lower high in the RSI suggests upward momentum may be running out of gas for now. Next downside support in a pullback near $1.1200.
EURGBP continues to roll down from 0.7900 where it appears to have completed the right shoulder of a head and shoulders top. Initial support possible near 0.7785 a Fibonacci level then the neckline near 0.7700.
GBPUSD is still swinging upward within its $1.4215 to $1.4585 trading channel with support moving up toward $1.4400 and the pair testing $1.4480 with next resistance near $1.4500. Rising RSI confirms increasing upward momentum.
USDCAD has resumed its downtrend, trading under $1.3000 once again toward $1.2970 with resistance falling toward $1.3030 from $1.3105. RSI oversold again and a positive divergence suggests downward momentum may be slowing. Next support at the October low near $1.2835.
CADUSD remains in an uptrend bumping up against $0.7700 but an overbought RSI and a negative divergence emerging suggests the current rally may be near exhaustion. Next resistance near $0.7795 the October high with support near $0.7600a Fibonacci level.