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Market Wrap
Who needs a safe haven forex currency when you have the US government priming the markets for a trillion-dollar pump of stimulus?
The difference in momentum from the pre-London session open to the London session close has been 180º about turn. Traders moved out of the yen and dollar and into the CAD and NZD, closely followed by the AUD. It could be optimism that the markets will continue to always rise, it could be US earnings beating market expectations, but it is most likely the sense that more stimulus is about to enter the markets.
Senate Majority Leader Schumer said the procedural vote on advancing President Joe Biden’s infrastructure bill will go ahead as planned today. The potential filibuster soon followed as the opposition Senate Minority Leader McConnell said the Democratic leader “appears to be intent on calling a vote he knows will fail” and described the move as a “stunt.”
The markets have so far reacted as though this is going to get the votes needed and have all undone the sell-off from the previous sessions this week.
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The S&P500 has moved above yesterday’s high cementing the touch of the daily 50 ema as dynamic support once again. The big tech companies are mixed in current trading with Apple, Amazon, Netflix and Tesla all refusing to go green, which is weighing on the Nasdaq a little more. Nasdaq futures have 14,800 and then 14,850 as big liquidity levels, so a pop higher could end 50 points further up towards new all-time highs. Netflix trading lower is probably on a less hawkish 3rd quarter outlook, but the subscriber numbers beat expectations, so I am confident the share price will continue to make gains.
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The US dollar index is still trading within the very neat rising channel, but has done one of those rare things, where it takes out the previous day’s lows. There is nothing to do at this level, within this range. A decent set of swing highs and lows in any direction is what I will base my trades off. Currently price action and momentum are to the upside.
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Tomorrow is a big day for the euro, so I am glad it found support at the trend line as that shows it still has significance. Should price fall below on dovish comments from President Lagarde and the ECB, I’ll use the trend line as a marker for possible resistance to trade short off. Otherwise, we must wait for the price action to confirm an uptrend.
The drop in the US dollar is fuelling the energy markets, and oil has regained 3% of the recent losses. There was a 2.1mb build in the EIA inventories, but WTI shrugged that off. The Canadian new house prices moved higher and the overall effect on the Canadian dollar was an appreciation against all the major crosses. The biggest move was a 1.30% rise against the Japanese yen in a sign of Risk-On sentiment echoed everywhere else.
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The USDCAD on the back of oil and CAD gains has pushed the USDCAD to the support of the daily 200 ema, which for now has held.
Traders on the ActivTrader platform are very bullish the USDCAD, so these traders could get squeezed further. A move below the daily 200 ema would be met by a rising daily 20 ema, which could slow down the decline with the recent price action also being a breakout of a range, so testing inside those ranges is also going to be supportive of the price. However, the rising channel from the June lows to recent swing high is likely to break down. A further decline in the DXY would be good confirmation of a continuation lower.
