Market Overview

All eyes will be on President Trump this evening as he will give his first official address to Congress in a speech that is expected to begin to lay out policy details. A $54bn increase on defense spending (a 10% rise) has already been leaked (to be fully funded from cuts to environmental, international aid and administrative measures). However markets are really looking for details on tax reform and infrastructure spending. Traders will be waiting for Trump, but in the meantime, there has been a pick-up in Treasury yields on the back of comments from FOMC hawk Robert Kaplan who has been the latest Fed speaker who appears intent on leading the market for the possibility of a March hike. Right now the expectation is still that it is unlikely (CME Group FedWatch tool implies just 31% chance). The Fed will historically not want to surprise the market with a hike, so these Fed speakers have still not yet given the Fed enough of a chance yet really. Will Trump give the market a fillip today, furthermore, Fed chair Janet Yellen and her vice chair Stanley Fischer both speak on Friday just before the Fed goes into its close period in front of the FOMC meeting.

Markets remain supported, with Wall Street once again posting a record high, with the S&P 500 +0.1% at 2370, whilst Asian markets were mixed to positive with the Nikkei +0.1%. European indices are slightly positive in early moves. In forex there have been some choppy moves in the past 24 hours, and this sentiment has continued today with the yen still tending to outperform. However the euro has also gained some ground as the yields spread of French over German debt has dipped back on the improved prospects of Emmanuel Macron. Gold and silver have found support after yesterday’s late dip, whilst oil is also supported again.

US economic data dominates the announcements today as growth and consumer confidence are released along with a couple of surveys and housing data. The second reading of US growth is released with US GDP (Prelim – Q4 2016) at 1330GMT. The forecast is for a mild upward revision of the Advance reading to +2.1% (from +1.9%). The S&P Case Shiller House Price Index is at 1400GMT and is expected to stay at 5.3% growth. The Chicago PMI is at 14445GMT and is expected to improve to 53.1 (from a big miss of 50.3 last month), whilst the Richmond Fed Manufacturing Index is at 1500GMT and is expected to drop slightly to 10 (from 12) although remains well in positive territory. The Conference Board’s Consumer Confidence is at 1500GMT and is expected to dip very slightly to 111.1 (from the still extremely strong 111.8 last month).

Chart of the Day – NZD/USD

The Kiwi is increasingly becoming a consolidation play now, with the resistance at $0.7240 now a key gauge. The bulls lost control at the beginning of February as the market broke below $0.7240 and topped out. However the formation of a new downtrend has failed to materialise and the market has subsequently consolidated for the past couple of weeks. Using support around $0.7130, a consolidation has formed under $0.7240. This is a pivot that has broadly been in place since September and has on numerous occasions played out as a key turning point for the market. The near term direction is now going to be determined by the break of either the support at $0.7130 or the pivot resistance at $0.7240. A closing breakout through wither level will determine the direction. The momentum indicators are very mixed, and although the Stochastics have ticked higher the RSI is neutral, as is the MACD set up. The hourly chart shows once again a failure around $0.7240 yesterday whilst momentum is in a neutral range bound configuration but actually have a mild positive bias. However, for now as the market looks for real direction, the wit for a catalyst goes on. Initial support is $0.7175.



After more than three weeks of trending lower the euro is showing signs of a near term improvement once more. The question is, how sustainable the recovery will be. The initial sign came yesterday as the market moves above the resistance band $1.0577/$1.0617, to breach the downtrend. Although the bulls could not muster a closing break as an intraday pullback meant a close back below the mid-point in the range. However the early signs are positive again today and a close back above $1.0617 would open the resistance $1.0680/$1.0710. However, as yet there is little reason to believe that this move is going to be a consistent recovery and with momentum indicators looking medium term negatively configured, rallies will still be seen as a chance to sell. The hourly chart shows more positively configured momentum is building with MACD lines above neutral and hourly RSI above 40/50. Resistance from yesterday’s high is $1.0630.



The market continues to gravitate back towards the pivot at $1.2430. With the failed upside break last week, Cable has unwound back and looked initially yesterday to be making a move towards the downside, only for an intraday rebound has brought the price back once more towards $1.2430. The momentum indicators are reflective of this neutral state, with the RSI remaining flat around 50 and MACD lines also flat. So, once again the market is back into its neutral configuration on both daily and hourly charts, showing little sign of direction and waiting for a catalyst (maybe from Trump tonight?). Support is building with this now being the third time $1.2380 has captured the lows. Resistance is being capped around $1.2480 which now protects $1.2570.



There is still a slight bearish bias to the outlook despite the technical rally that formed a positive candle yesterday. The rebound off 111.90 may have pushed above the pivot at 112.50 but there is little sign on the momentum indicators that this will prove to be a decisive move. The Stochastics are still falling, whilst the MACD and RSI indicators retain a negative slant. Today’s candle could be key for the near term outlook as already the early move is back lower, below 112.50, but if the bulls can begin to put together a run of positive candles then the outlook will begin to improve. I remain a seller into strength with the run of lower highs still in place. The hourly chart reflects a near term improvement and that even overnight the regard was being given to the 112.50 pivot, so the fact that the market is back below should not be discounted. Resistance is initially 112.90, before 113.65/113.80. The support at 111.80 protects 111.60 and then 111.30 which I expect to be tested in due course.



Aft the market broke out above the $1244 resistance the posting of a once day corrective candle needs to be considered as a consolidation for now and to be taken with caution. The potential for near term profit taking on a market that is running at its highest since November is elevated. However, strong runs will often have near term blips that can often provide the next opportunity to buy. The momentum indicators remain positively configured and anything that looks to build on the support around the breakout at $1244 could be a positive move for the bulls. The hourly chart shows the move back from yesterday’s high at $1263.80 as simply unwinding overstretched near term momentum and back towards levels on the hourly RSI and hourly MACD lines that have been consistently supported. Expect the band of support $1244/$1250 to be considered as a buy zone now and to watch for buying opportunities. Technically there is little reason not to expect further gains in due course towards $1280/$1300.



The bulls remain in control as the market continues to hold not only above the $54.00 level, but also is broadly maintaining the recent uptrend. The daily momentum indicators are straining to improve with the Stochastics now around 80, however the RSI remains below 60 and MACD lines are only mildly rising now. The initial support at $53.75 which was Friday’s low is gaining importance near term, with the reaction low at $53.35 now a key level as it also comes around an old pivot. With hourly indicators such as moving averages positively configured, the implication is that corrections are being bought into. Resistance is now at yesterday’s high at $54.60 with $54.95 now protecting $55.25.



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