USDCAD and US 500 Index

Markets are still consolidating with hints from the US500 Index that it is in pole position for a breakout to fresh highs. The other indices are range bound to a large degree albeit at the top of their recent ranges. The vaccine developments are a huge positive for the markets that will allow the reopening and expansion of the global economies. The proposition of fresh stimulus in the US in particular is also filling the sails of traders and investors. Senate Majority Leader Mitch McConnell said yesterday that he saw a few hopeful signs towards a possible virus aid stimulus compromise. However, Senate Minority Leader Chuck Schumer said that McConnell does not seem inclined to compromise. He added that there could be a double-dip recession without a stimulus package and additional funding is crucial for vaccine distribution. But he did acknowledge that they are already closer to a deal because of bipartisan aid talks. Later US President Trump said that he would support a covid relief bill which has once again cleared the deck to stimulus if the parties can agree on a compromise. Brexit is also front and centre at present. There seems to be a strong focus on the matter of fisheries with France spearheading the drive for it to hold as much access to fishing grounds as possible. French Secretary of State for European Affairs Beaune has said that France would veto any Brexit deal that they deem unsatisfactory. One report said that Brexit talks are heading for a showdown between Boris Johnson and Emmanuel Macron this weekend with the prospect of an EU deal now dependent on French access to fish in British waters. In response a British official said “Our hopes of any movement on Friday are pretty much gone now,” said one UK source, with Monday now set as the unofficial deadline for a deal by Downing Street. There are expected to be further Brexit headline during the day and over the weekend that may move markets. The Japanese 225 has closed lower by -0.22% in today’s session. The Hang Seng is trading up 0.1%. The Shanghai Composite is trading up by 0.05% also. Gold is trading lower at 1842.00 while USDJPY is trading at 103.860.

This morning UK Construction PMI is expected to fall to 52.3 from 53.1. In the afternoon US Non-Farm Payrolls are expected to fall to 480K from 638K last month. The Unemployment rate is expected to move down to 6.8% from 6.9%.

USDCAD

The USDCAD pair is now trading around the 1.2860 level having fallen back from the March high of 1.4668 and broken supports around 1.2950. The pair broke support earlier in the week at 1.3000 and broke the low at 1.2928. These levels may be turned to resistance including the 1.2900 level and 1.3000, followed by 1.3100. Resistance may be seen at 1.3172/1.3180 followed by 1.3200 and 1.3250. Above the 1.3300 level, resistance is being seen at 1.3389 and 1.3400 followed by the 1.3420 area. The 1.3500 may provide resistance ahead of the 1.3600 level. Further resistance may be seen at the 1.3646 lower high, the 1.3670/1.3686 area followed by the 1.3700 level and the 1.3750 zone of consolidation from late May. The 1.3860 former area of support may now be resistive ahead of 1.1400. The chart contains potential resistance at the 1.4100 round number followed by 1.4141, 1.4180, the 1.4250 area and 1.4298/1.4300 zone. The previous lower high formed at 1.4173 and this may also provide a level to lean against, with a breakout targeting the 1.4400 level. Beyond this, the 1.4424 level is followed by 1.4500 and 1.4560. The high created at 1.4660 represents the resistance level to beat, followed by potential resistance at the 1.4700 level. The next area may prove to be resistive at 1.4750. Beyond this, the 1.4800 area may also create an interest for traders. A break above these levels might seek to test 1.4900. Beyond this, the 1.4950 level comes into play followed by 1.5000.

Support for the pair broke around the 1.3000 area after price failed to remain above the 1.3200 level. The 1.2850 area is being used as support, in conjunction with 1.2860 and these levels are combining to form a zone that is attracting interest from traders. Traders may potentially lean on this area followed by the 1.2825 and 1.2800, if the round number is broken, with further selling potentially opening the way to 1.2750, 1.2700 and 1.2650.

US 500 Index

The US 500 Index price is currently trading around the 3672.00 area after breaking the strong resistance at the 3600.00 round number. The 3680.00 area may also be resistive with a break above this month’s high of 3675.00 opens the way for a test on 3690.00. The 3700.00 area may provide resistance along with 3715.00. Further resistance may be found around the 3730.00 area, followed by 3750.00 and the 3760.00. A break higher may see to engage the 3800.00 area following a break of the 3740.00 area. The chart shows that price is attempting to break out after consolidating in a wide range and forming higher highs and higher lows. As price is at the top of the range sellers may emerge as the broader political and economic picture remains uncertain.

Support may also come into play around 3600.00/3590.00 and 3580.00 in the event of a deeper selloff to 3550.00 and 3500.00. Below these levels, 3400.00 is followed by 3344.00 and 3311.00. These levels are in turn followed by the 3300.00 area, the 3233.00 higher low level, and the 3200.00 round number area. The 3166.00 level may be supportive followed by the 3115.00 level and 3100.00. The 3070.00 area has been used as support and this is followed by further potential supports at 3061.00, 3044.00 and the 3017.00 level. The round number 3000.00 area may also offer support followed by the 2980.00 and 2950.00 levels. The 2908.00/2900.00 area may be used as a higher low in the event of a pullback. Further support may be found in the 2860.00/2850.00 area, followed by the 2820.00 area and the 2800.00 round number. Below these levels, the 2750.00 area is followed by 2725.00 ahead of the 2700.00 round number. The 2645.00 area may also provide support to price action followed by the 2500.00 area and the April low at 2240.00/2437.00. The 2400.00 level is followed by potential support at 2345.00. Below these levels, the 2300.00 area and the low at 2275.00 may potentially be used by buyers. The 2250.00 level might follow as potential support and this is in turn followed by the 2200.00 round number. Below this, the 2120.00 may be used as support followed by the 2100.00 area. The 2000.00 area could possibly see buyers attempt to enter the market in the event of another selloff.

Philip Konchar

Core Spreads

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