USDCAD and US 500 Index

Yesterday was US FED Chair Powell’s second day in Congress. He made some comments on rates but nothing new from the day before and markets maintained the themes from Wednesday. However he did speak about his wish to see tighter controls on digital products and cryptocurrencies. This prompted US President Trump to row in behind Powell adding that he did not like cryptos and supporting the push for regulation of the industry. He said that the USD was reliable and dependable and that cryptos are not money, with a value that in highly volatile and based on thin air. He added that if companies want to become a bank they should seek a new Banking Charter and be subject to Banking Regulations, just like other banks. In other news Japanese Revised Industrial Production came in at 2.0% from a forecast of 2.3%. German WPI fell to -0.5% against an expected 0.2%, from a prior reading of 0.3%. Asian Equities have moved higher overnight following on from US markets. European Futures are set to open around flat. The USD is weaker against the other majors, Treasury yields are lower at 2.127%. Markets are pricing in a 25bps cut at the end of the month.

Chinese Trade Balance data is due to be released shortly, the forecast is for a decrease to 276B from 279B previously. MPC Member Vlieghe is due to in London this morning. In the afternoon US PPI data is expected to remain at 0.1%. Core PPI is expected to remain at 0.2%.

USDCAD

The USDCAD pair is testing lower towards the 1.3000 area as price moves past 1.3068 and the low from last week at 1.3038. Price is currently trading around 1.3027 in between the support levels. A test of 1.3000 may find support emerge at the round number. A failure to find support might result in a move lower towards the 1.2900 support level. Further selling may push price towards the 1.2850 area and lower.

Resistance has been difficult to establish following the loss of the rising support trend line that formed the rising wedge bottom around 1.3275. A break back above the 1.3100 level might set up a test on the lower highs at 1.3144, with a view to pushing price back to the consolidation level at 1.3200. Beyond this the 1.3275/1.3300 area may form resistance with the trend line passing through it. The lower high at 1.3432 may be used as resistance above 1.3400.

US 500 Index

We join the US 500 Index as it attempts to make another break above the 3000.00 level. Today’s attempt has set a new high for the index at 3008.50 with price now trading back at 3004.33. The initial test on 3000.00 found support at 2958.80 and price action created higher lows in order to maintain a bullish bias since then. A daily close above 3000.00 would potentially help the index in an attempt to test towards the 3050.00 area. Beyond this potential resistance may arise around 3100.00.

Support at the 2958.80 area may be called on again if price fails to make headway above 3000.00 or if the fundamental situation changes. A loss of this area would break the sequence of higher lows, indicating either a possible consolidation or a retracement. Below the 2950.00 area price may break towards the 2910.00 higher low, where support and resistance was discovered in the past. Under the 2900.00 possible support area, 2866.00/2860.00 may be used as support.

 

Phillip Konchar

Core Spreads

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