World Bank Forecast Cut Weighs on Sentiment
Despite better than expected results from US bank heavyweights JPMorgan Chase and Goldman Sachs, stock markets in the US and Europe have been sliding while USD and JPY have been rebounding this morning. Traders have gone on the defensive again after the World Bank cut its 2013 global growth forecast for 2013 to to 2.4% from 3.0%, and indicated it expects the Eurozone economy to contract by 0.1% this year and not return to growth until 2014.
The bank suggested that the biggest risks to the global economy (which should come as no surprise really) include: stalling of progress in the European debt crisis, ongoing national debt and fiscal problems in the US, slowing investment in China and any disruption to global oil supply. It also noted that developing economies have not been able to keep pace with stock market gains over the last year due to weak capital investment and industrial activity.
In currency markets, GBP and EUR have come under particular pressure today off this gloomy forecast. Conflicting chatter from European officials over whether recent gains in EUR could impact the economy haven’t been helping either.
Resource currencies have dropped off at a more moderate pace with the oil sensitive CAD and NOK underperforming their peers. Precious metals have been giving back some of yesterday’s gains relative to the rebounding greenback.
Commodity markets are mixed today with copper retreating but grains like wheat and soybeans and softs like cotton and orange juice climbing.
It’s a busy morning for economic news in the US. Highlights include
Consumer prices 1.7% vs street 1.8%
Industrial production due at 9:15 am ET
DOE energy inventories due at 10:30 am ET
Beige Book due at 2:00 pm ET
Other significant announcements expected later today include:
Brazil interest rate decision sometime today, no change expected
Australia employment due at 7:30 pm ET, 4.5K increase expected
It’s a big day for earnings from US banks. Highlights include:
Goldman Sachs $5.60 vs street $3.78, revenue $9.2B vs street $7.9B
JPMorgan Chase $1.39 vs street $1.16, revenue $23.6B vs street $24.2B
Comerica $0.68 vs street $0.64
North American indices
The Dow Industrials (US30 CFD) remain above 13,450 but below 13,500 and remain vulnerable. Next support on a breakdown appears near 13,380 then 13,300.
The S&P 500 (SPX500 CFD) continues to consolidate in the 1,460 to 1,475 rantge with next support near 1,450.
The S&P/TSX 60 (Toronto60 CFD) continues to sit about halfway between its 718 breakout point and 732 next resistance.
Copper is back testing $3.60 uptrend support. RSI rolling back under 50 suggests negative momentum is building and that there’s still room to retreat before this correction runs its course. Next support appears near $7.50 and $7.40 with initial resistance on a bounce in the $3.70-$3.72 area.
US crude looks vulnerable here. It is back testing $93.00 key support where a breakdown would complete a bearish rising wedge and signal the start of a correction that could carry it back down toward $92.30 or even $91.20. Initial resistance on a bounce appears near $94.40.
UK crude remains sluggish trading in the bottom half of a $110.00 to $112.00 channel.
Gasoline is drifting back toward the middle of its $2.60-$2.80 trading range and with RSI rolling back under 50, momentum suggests the low end could potentially be retested.
Natural Gas is stalling near $3.40 as it approaches key resistance in the $3.45-$3.50 area.
Corn remains above $7.20, confirming yesterday’s breakout from a five month downtrend. Next upside resistance appears in the $7,65 to $7.75 area.
Soybeans remain in an upswing trading near $14.30 with next resistance near $14.50 then $15.00 and support moving up toward $14.20 from $14.00.
Wheat is breaking out of a two month downtrend today clearing $7.80. Next upside resistance in this rebound appears near $7.90 then $8.10.
Cotton continues to recover. It is been steadily rising in recent months and is currently trading between 75.2 and 77.8. RSI is holding above 50, a sign that upward momentum remains intact. Next resistance on a breakout appears near 80.0 then 83.5 and 86.5 on trend.
FX this morning
Gold is bumping up against downtrend resistance today which it has been unable to overcome so far. RSI has broken through 50 though indicating that upward momentum continues to accelerate. A break through $1,680 would confirm the start of a new upswing with next resistance on trend near $1,695 then $1,715-$1,725.
Silver is consolidating recent gains between $31.00 and $31.50 with next upside resistance near $32.00 and $32.75 and more support near $30.60.
Platinum remains volatile as it corrects an overbought RSI trading near $1,675 with resistance near $1,.690 then $1,700 and support near $1,660 then $1,.645.
USDCAD has broken out of a short term downswing while RSI suggests upward momentum is accelerating. A break of $0.9880 would confirm the start of a new upswing with next resistance near $0.9900, $0.9930 and $0.9970.
EURUSD has slipped back under $1.3300 and could retest $1.3180 or $1.3000 while still remaining within its broader uptrend.
GBPUSD is breaking down today, taking out $1.6000 with next support near $1.5960 and $1.5920. A measured move suggests a retest of the $1.5830 low can’t be ruled out.
USDJPY has dropped back under 88.50 and has broken an initial trend support line while RSI also suggests negative momentum building. Next key support appears near 86.75.
AUDUSD is steady near $1.0500 as a bullish ascending triangle continues to form below $1.0600.
Apple broke down through $500 yesterday, taking out a major psychological barrier and signalling the start of a new downleg with next support near $475 then $460. Initial resistance on a rebound appears near $518 then $525.
Google successfully tested rising channel support near $720 and RSI has bounced up off of 30 suggesting the recent correction may be over and that the shares have technical room to rebound. Initial resistance appears in the $735-$740 area then closer to $760.
Research In Motion smacked into $15.00 resistance yesterday and has dropped back a bit. It continues to attract support abpve $13.90, the high end of a recent gap, keeping its broader uptrend intact.
Facebook fell back in profit taking against yesterday’s search announcement. Overbought RSI conditions have already started to ease and $30.00 has emerged as a new support level, both suggesting that this could just be a quick correction and that the main recovery continues.