FOMC and RBNZ previews and reaction to Apple’s big earnings miss

Apple's quarterly report struck out completely last night with the company coming in below estimates on sales, earnings and guidance. This news has hit the NASDAQ hard with futures trading down 1.1% overnight. Apple could come under more pressure today with a number of brokerages cutting their target prices on the smartphone maker this morning.

There had been concern in some quarters heading in to the report about the iPhone's life cycle having peaked, ‎so Apple's big disappointment has not had as big an impact on broader markets. Dow and SPX futures are trading down about 0.2% while European indices are mixed with the FTSE down 0.4% and the Dax up 0.2%.

Other companies that could be active on news today include Boeing who had a mixed report, missing on earnings but beating the street on sales. Garmin beat the street on sales and earnings. Twitter also had a mixed report (missed on sales but beat the street on earnings and active users), while Chipotle reported dismal results as generally expected but perhaps in some areas not as terrible as feared.

The main event of the day for traders is the Fed announcement this afternoon. It's pretty much a done deal that the Fed won't change rates this month, having cut its plans from 4 rate hikes this year to two. Although the markets have recovered from the pounding they took earlier this year, China’s economy has stabilized, and some FOMC members favour a hike, the majority of Fed members don't appear ready to rock the boat too much yet.

It is possible though that the Fed may signal the potential for a June hike. Although bond prices suggest expectations of a dovish Fed, the two more dovish regional voters this year (Bullard and Rosengren) have suggested the street may be too pessimistic about the economy and underestimating the number of potential rate hikes this year. Recall that the fed went more dovish after crude oil fell to $26 and deflation/recession fears increased with WTI back up at $45 this morning and the potential inflation pressures could pick up as the year means pressure on the Fed to take a more hawkish turn may grow.

A June hike would keep the Fed clear of the election campaign and on course for 2 increases this year. Ways the Fed could signal it's considering a June move could include more hawkish dissenters, a more upbeat economic assessment, or talk of rising price pressures. A dovish tone could boost stocks and send USD lower while a hawkish tone could knock stocks back briefly and boost USD a bit (but not too much as the currency still appears to be pricing in 2 hikes this year unlike bonds).

Crude oil is soaring overnight, with WTI and Brent rallying 2.2% and WTI challenging $45.00. A surprise 1.1 mbbl drop in API oil inventories sent oil sharply higher. Oil could be active through the morning around the DOE inventory reports with traders looking for confirmation or rejection.

In currency trading, AUD has been slammed for a huge 1.75% loss after Australian consumer prices  fell 0.2% from the previous quarter sparking speculation that the RBA may need to cut interest rates later this year. This news also pushed NZD down 0.5% ahead of today's RBNZ meeting.

The RBNZ is due to report its latest OCR decision 3 hours after the Fed. While no cut is widely expected, some have speculated a New Zealand cut could be coming soon. Don't be surprised if Governor Wheeler tries to talk down the dollar in a bid to put a lid on recent gains and keep it under 70 cents. He could do this through threatening intervention again or signalling the potential for another rate cut.  


Corporate News

Apple    $1.90 vs street $2.00, sales $50.5B vs street $52.0B, guides next Q sales to $41-$43B below street $47.4B, 10% dividend increase

Boeing            $1.74 vs street $1.84, sales $22.6B vs street $21.5B

Twitter    $0.15 vs street $0.10, sales $594M below street $607M, 310M active users above street 308M, guides next Q sales $590M-$610M below street $677M

Garmin    $0.49 vs street $0.42, sales $624M vs street $586M

Chipotle    ($0.88) vs street ($0.98) same store sales (29.7%) sales $834M below street $867M

eBay             $0.47 vs street $0.45, guides next Q to $0.40-$0.42 below street $0.44


Economic News

Significant announcements released overnight include:

US API crude oil inventories        (1.1 mmbbls) vs street 0.5 mmbbls

UK Q1 GDP            2.1% vs street 2.0% vs previous 2.1%

Australia consumer prices    1.4% vs street 2.0%

Spain retail sales        4.4% vs street 3.4%
Sweden trade balance        SEK 3.9B vs street SEK 1.7B

 

Upcoming significant announcements include:

8:30 am EDT        US advance goods trade bal    street ($62.8B)

10:00 am EDT        US pending home sales        street 0.8%

10:30 am EDT        US DOE crude oil inventories    street 1.75 mmbbls
10:30 am EDT        US DOE gasoline inventories     street (1.0 mmbbls)

2:00 pm EDT        US FOMC interest rate        0.25%-0.50% no change expected

9:00 am NZDT Thu    NZ RBNZ cash rate        2.25% no change expected
5:00 pm EDT Wed

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Chart Signals: WTI breakout, big tests underway for GBP and CAD

WTI is climbing again this morning, taking a run at the $45.00 round number. Meanwhile, CADUSD is nearing the $0.8000 psychological barrier and the recovering Sterling is testing the neckline of a head and shoulders base near $1.4625 where a breakout would confirm the start of a new uptrend.


North American and European Indices

US 30 continues to consolidate recent gains around the 18,000 round number trading between 17,859 and 18,160. RSI falling back toward 50 indicates momentum shifting from upward to neutral.

US NDAQ 100 has been pounded from 4,500 Fibonacci resistance back toward is 200-day average near 4,410 with next support possible in the 4,390 to 4,400 area. RSI breaking under 50 confirms momentum turning downward.

US SPX 500 is consolidating recent gains in the 2,075 to 2,115 range trading near 2,090. RSI indicates upward momentum fading as a sideways consolidation phase emerges.

UK 100 has stabilized above its 50 and 200-day averages with support moving up toward 6,260 and the index bumping up against 6,300 where a breakout would confirm the recent correction has ended with next resistance near 6,375. RSI holding 50 confirms underlying uptrend remains intact.

Germany 30 continues to attract support above 10,200 recently trading in the 10,260 to 10,310 range with next resistance near 10,375. So far this appears to be a normal pause within a larger uptrend.

Commodities

Gold is trading steady shown by the RSI sitting on 50 and the price near $1,245 within a $1,228 to $1,268 channel between Fibonacci support and shoulder resistance with a head and shoulders top still forming.  

Crude Oil WTI is breaking out again, clearing $43.50 Fibonacci resistance and advancing on $44.00 with next potential resistance at the $45.00 round number. RSI getting overbought but indicates upward momentum increasing again for now.  


FX

US Dollar Index is holding steady near 94.50 within a 93.65 to 95.25 sideways trending channel.

EURUSD is bouncing around $1.1305 a Fibonacci level trading between $1.1290 and $1.1330. RSI near 50 suggests sideways to downward trading with a retest of $1.1255 Fibonacci support possible.

EURGBP continues to retreat confirming 0.7785 as lower Fibonacci resistance. Falling RSI indicates downward pressure increasing. Next potential support near 0.7740 then a Fibonacci cluster near 0.7700.

GBPUSD has run into resistance near $1.4625 a Fibonacci level that doubles as the neckline of a head and shoulders base pattern. Retrenchment back toward $1.4580 appears normal in this context with more support possible near $1.4550. Rising RSI indicates upward momentum still accelerating through this small correction.

USDCAD continues to trend lower with resistance falling toward $1.2600 from $1.2680, the pair trading near $1.2585 and next potential round number support near $1.2500. Oversold RSI suggests it may need to consolidate in the near term.

CADUSD remains under accumulation advancing on $0.7940 but could encounter round number resistance near $0.8000 particularly with RSI getting overbought again. Initial correction support possible near $0.7900.