Market Overview
The dollar bull run has been reversing in recent weeks. Concern over the prospect of what a President Trump might do has turned from prospective to being very real, as his series of controversial executive orders have been announced. Trump’s protectionism has pulled the dollar lower, however last week’s Fed did little to change the course of dollar, whilst Friday’s mixed payrolls report has also done little for the recently corrective dollar move which continues to impact across forex and commodities markets.
Jobs growth is almost becoming a side thought now as the market is looking for wage growth in the payrolls report. Friday’s wage growth reading was disappointing and the dollar (In the absence of any significant market moving data today) remains under pressure. This is adding up to a safe haven shift with the yen, gold and US Treasuries all being bought with the prospect of the Fed’s pace of tightening perhaps being scaled back a touch.
Forex trading shows little real direction this morning, whilst equities have been supported following a strong close on Wall Street on Friday (S&P 500 +0.7% into the close at 2297). Commodities have also been supported, with gold looking to hold a break above $1220 and oil also pulling higher again.
There are no major economic announcements of any note today.
Chart of the Day – FTSE 100
Are the bulls positioning themselves for another bull run higher? Last week ended with three consecutive positive closes with the magnitude of the bull move expanding into Friday’s close which was a two week closing high. The next resistance is a move above 7205 which is a minor intraday resistance and lower reaction high within the recent corrective move. The momentum indicators are ticking higher now with the RSI back above 50 and confirming the two week closing high on the price, whilst the MACD lines have unwound to neutral and are looking to plateau. If the Stochastics begin to pull back above 20 this would also be a near term buy signal which would be the first such signal since early November when the FTSE 100 last made a key low. This leaves the potential that last week’s low at 7094 is now a key low, from which the bulls will look to build from, whilst another higher low above here this week would add to the bull confidence. Above 7205 the resistance is 7250 and then the key high at 7354. Friday’s low at 7134 is the initial support.
The consolidation that has been playing out over the past few days continues to test the uptrend. Once more there was an intraday dip that failed to close with a breach of the uptrend and the bulls remain in control. The momentum indicators are still positively configured but are looking a little tired and it will be interesting to see whether the bulls can reinvigorate their run. The RSI has been between 55/60 now for the past couple of weeks, whilst the Stochastics have plateaued and the MACD lines are coming together. The hourly chart shows the market remains positive above $1.0710/30 but the hourly momentum indicators are far more ranging in their near term outlook. With $1.0800 forming a high this morning, the resistance at $1.0828 from last week’s high adds to the band of medium term resistance $1.0850/$1.0870. The outlook retains a positive bias with the uptrend but the bulls are in danger of losing their way a touch.
The outlook within the recent range has taken a slight shift back towards negative in the past couple of sessions. The bearish engulfing candle from Thursday was backed up by another confirmation move lower on Friday. This now puts the medium term key breakout support at $1.2430 under pressure. The move early this morning may be one of consolidation, however the momentum indicators are beginning to turn lower and are closing in on a series of bearish near term signals. The Stochastics have crossed lower and are looking set to confirm a sell signal, whilst the MACD lines have also pulled back together and are threatening to do the same. The hourly chart reflects the support above $1.2410 with what has now turned into a 300 pip range. Hourly momentum indicators are also configured as a range play with a negative bias. The initial resistance is $1.2537 with a mid range pivot at $1.2550.
The pressure on the closing support at 112.50 continues. The past few days continue to add to the negative bias with the consistent testing of the old range low at 112.50. The market is now consistently testing below this level on an intraday basis, but for now this support remains intact on a closing basis. However, the momentum indicators continue to imply there is greater downside pressure, with the falling MACD lines and the Stochastics again in decline. The RSI though could be the indicator to watch as it has been holding above 40 for almost two weeks now and if this starts to drop consistently into the 30s then it would suggest the pressure is really growing. The hourly chart shows a series of lower highs, with Friday’s high at 113.45 under the 114.00 pivot. An intraday breach of 112.00 would re-open the downside, as would a closing break below 112.50, meaning 111.32 was then in play, but also complete a range breakdown and imply around 300 pips of further downside.
Gold
Gold seems to be on the brink of confirming a bullish breakout above $1220. Although an intraday move above the resistance was seen last week, the market could not hold the break and pulled back However there has been a strong of positive candles that suggest the bulls are confident and once more today the market is testing higher. The momentum indicators are positive without being excessively so, however the RSI is now rising into the mid-60s and has further upside potential, whilst the Stochastics are also rising. Intraday dips are seen as a chance to buy, with the uptrend still a factor. The hourly chart shows positive configuration on the momentum with the RSI consistently finding support around 40 and the hourly MACD lines unwinding to neutral. There was another brief break of the trend higher on Friday with the Non-farm Payrolls volatility, but the rising 55 and 89 hour moving averages have become a good gauge. The early gains today back above $1220 are positive and a close above would open $1233, whilst the bulls would be eying the $1241 next key area. Fiday’s spike low at $1207 is now key supportive near term.
The oil price is beginning to threaten the upside limits of the trading range once more after a period of consolidation however, can the bulls sustain the momentum this time? Last week ended with a couple of days of intraday moves above the near term resistance at $54.10 however the uninspiring daily candlesticks which have been neutral or tepid at best suggest the bulls are still unable to make the sustainable closing breakout. Despite this, momentum indicators are positively configured, with the Stochastics and RSI towards 5 week highs which are looking to lead a breakout on the price. A move above the resistance at $54.35 would re-open the $55.25 key January high and the hourly chart shows the price has spent the past couple of days trying to build above $53.30/$53.50 near term support. However, ultimately this needs to still be played as a range and this would mean that moves towards the range highs are likely to run out of steam with profit taking. There is still much preventing the bulls from making a sustainable breakout and the technicals do not suggest this is going to change soon.
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