Markets have been sending mixed signals today as traders prepare for a very busy second half to the week.
Asia Pacific indices and commodities led by copper have been soaring overnight boosted by a higher Chinese GDP growth forecast from a major think tank. The energy and agricultural groups have also been climbing on this news and a weaker USD.
USD has been weakening ahead of today’s FOMC decision. While no changes to monetary policy
are expected, the statement may be analysed closely for indications of how long the central bank plans to keep its open ended QE3 program going. Precious metals are climbing today taking advantage of the falling greenback.
Despite the commodity rally and weakening USD, resource currencies remain soft ahead of this afternoon’s RBNZ interest rate decision. Although no change is expected, recent soft data out of New Zealand may have some speculating on a surprise rate cut. If one does not materialize, the group could rebound later in the day.
JPY also continues to slide, while EUR, GBP and continental currencies are climbing. This indicates that capital continues to flow out of defensive havens back toward Europe as fears related to the sovereign debt crisis continue to recede. This has not, however, translated into stock market gains as major European indices are down moderately today with Italy’s MIB particularly weak.
US indices are trading slightly lower so far today as traders digest mixed economic numbers. The Advance Q4 GDP number was a big disappointment coming in negative for the first time since Q2 of 2009. With the Dow and S&P near all-time highs and their recent rally having pushed their RSIs into overbought territory, the conditions would appear right for a big correction. It’s possible that the GDP disappointment may be blamed on Hurricane Sandy, a one-time event and thus discounted, while another better than expected ADP private sector payrolls report may be providing some solace.
Overall, capital flows as we move into investing season (where deposits into retirement accounts create seasonal inflows of cash into markets) suggest that the sense of dread and fear that prevailed in recent years is dissipating and confidence about the global economy continues to improve, driving capital out of havens and back into risk markets.
The Chinese Academy of Social Sciences raised its GDP growth forecast for this year to 8.4% from 8.2%. This would represent a nice acceleration from last year’s 7.9% growth rate.
It’s a big morning for economic news, particularly in the US. Highlights include:
US ADP payrolls 192K vs street 165K, previous revised down t 185K from 215K
US Q4 GDP (0.1%) vs street 1.1% and previous 3.1%
Spain Q4 GDP (1.8%) over year vs street (1.7%)
UK mortgage approvals 55.8K vs street 54.5K
There are a number of major announcements today including two interest rate decisions:
US DOE energy inventories 10:30 am ET
US FOMC decision 2:15 pm ET, no change expected after QE increase last time
NZ RBNZ interest rate decision 15:00 pm ET, no change expected
Japan manufacturing PMI 6:15 pm ET, previous 45.0
Japan industrial production 6:50 pm ET, street (5.6%) over year
Germany unemployment rate 3:55 am ET Thu, street unchanged at 6.9%
Brazil unemployment rate 6:00 am ET Thu street 4.4% vs previous 4.9%
Canada GDP 8:30 am ET Thu 1.4% over year vs previous 1.1%
There are still lots of earnings reports today although the bulk of them are now from mid-size companies. Facebook reports after the close tonight. Research In Motion launches Blackberry 10 today.
Boeing $1.28 vs street $1.19
North American indices
The Dow Industrials (US30 CFD) are having an inside consolidation day so far with resistance emerging near 13,980. Despite an overbought RSI
and GDP disappointment providing reasons for a big correction, index remains well supported.
The S&P 500 (SPX500 CFD) continues to trade in the 1,500 to 1,515 area and has held in surprisingly well even with an overbought RSI. Additional support appears in the 1,475 to 1,485 range with next resistance near 1,.530 then 1,550.
The S&P/TSX 60 (Toronto60 CFD) is holding near 740 well above its 732 breakout point with next key resistance near 755 on trend.
Copper is bumping up against $3.72 where a breakout would complete a small ascending triangle and set up a potential test of $3.82, the high end of a bigger triangle. Rising RSI suggests the recent consolidation appears over with upward momentum accelerating again.
US crude continues to advance within a rising channel, currently trading near $97.50 with resistance near $98.00 and $99.50 with support moving up toward $96.50.
UK crude rallied overnight but has started to encounter resistance near $115.00 with more in place near $116.00. Initial support moves up toward $114.40 followed by $113.50.
Gasoline is driving toward a test of $3.00 where it may need to consolidate a bit with RSI getting overbought. Next upside resistance appears near $3.07 then $3.20 with support moving up toward its $2.90 breakout point.
Natural Gas has successfully tested its $3.20 neckline as support for now but its rebound has been limited. Resistance may emerge near $3.30 with next support on a breakdown near $3.05 then $2.75.
Corn is breaking out over $7.30 today suggesting that its upswing continues with next resistance near $7.65 and support near $7.25.
Soybeans have jumped up through $14.70 and appear poised to take another run at $15.00 to $15.40 resistance with RSI suggesting upward momentum growing with room still to rally. Support moves up toward $14.50.
Wheat is climbing within a $7.60 to $7.90 channel but it needs to clear $8.00 to confirm the start of a new uptrend.
Orange Juice is breaking out today with a move through 115 completing an ascending triangle base. RSI breakout over 50 confirms upward momentum growing. Next upside resistance appears near 123 where a prior low and a measured move converge.
FX this morning
Gold has rallied from $1,660 up toward $1,680. This is encouraging but gold still really needs to clear $1,700 to call off a downtrend and a big descending triangle that has been forming in recent months.
Silver is rallying up off of $31.00, setting a lower high that suggests the trend may be turning positive again. Next resistance tests appear near $32.50 then $33.85.
Platinum has climbed back above $1,680 into the upper half of a $1,655 to $1,700 trading channel.
USDCAD has dropped back toward par after smacking into $1.0100 resistance last week. It remains in an uptrend unless it can take out $0.9980 support.
EURUSD is breaking out today, clearing $1.3500 for the first time since late 2011. Next key upside resistance levels appear near a measured $1.3660 then $1.3800
GBPUSD continues to rebound but to show this is more than just a dead cat bounce, it needs to break through downtrend resistance near $1.5800. Next resistance after that appears near $1.5925 with support in place near $1.5700.
USDJPY is rallying again today, clearing 91.00 but it still faces significant potential resistance near 92.00 with support near 90.70 and 90.30.
AUDUSD continues to weaken. It has rolled down from a lower high near $1.0470 and back under an old trend support line A break of $1.0400 would signal the start of a deeper correction with next support near $1.0350.
NZDUSD failed to retake $1.0400 and has slipped back under $0.8330 with key trend support near $0.8260.