American markets in focus

18 April, 2018

US markets got a boost today from all the economic data that came out, and the USD did an about face and managed to claw back some ground on yesterday. The main driver was of course US building permits which lifted to 1.35M (1.32M exp), and US industrial production jumped to a nice 0.5% (0.3% exp), showing that the US economy is still managing to truck along despite the worries about Trumps fight against trade and now currencies. The stand out performer for me was of course the S&P 500 which I've looked into a lot more recently, as volatility and trend continues to be a major theme.

For the S&P 500 it was another day about the bulls and the 100 day moving average was once again a key level of resistance in stopping further movements higher. However the pullback that may have been expected has not shown itself and it looks like the bulls may have further ideas. With that in mind the next leg is likely to be to resistance at 2741 and it will be interesting to see if it can still drive higher. In the event the bears do fight back along the 100 day moving average I would look for support at 2664 in the current environment, with any further movements lower likely to flirt with the 200 day moving average again.

The USDCAD once again pushed to new lows today on the back of a weaker USD, and as the Canadian dollar continued to perform globally. However, the market is hesitant about the Bank of Canada and a potential rate rise, as tomorrow is the big day. Markets are currently pricing in a small chance of a rate rise, but this rises to almost 50% in May, so traders are being extra cautious about a potential surprise here. If there are signals of a hike on the cards expect a bearish movement, in the event there is a surprise hike I would anticipate the Canadian dollar smashing lower into the high 1.30's.

On the chart we can see that despite the warnings the USDCAD traders are currently pushing through support around 1.2548 and are looking to inch lower in advance of the upcoming meeting, with an obvious bearish look. With the reading tomorrow there are two key targets for traders and that will be support at 1.2406 and 1.2261 - both are attainable if the current trend continues. But for me the main target will be that 1.2406 level, not just because it's a key level, but also because it's a psychological level that will be where the bulls will be aiming to fight back. If the chances of a hike are much more implied, then certainly look for the bears to target that 1.2261 level. In the event we get a surprise then resistance at 1.2693 is likely to be the line in the sand before we see an impact on the head and shoulders pattern. As will all trades focused on, trend is your friend in this instance.


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