USDCAD and US 500 Index

The rally continues after a brief move lower mid-week that resolved into new all-time highs on US and European equities. The bullish stance remains firmly intact with the volatility index breaking lower yesterday. The surge higher is associated with the reopening of economies and the use of stimulus cash to chase prices higher in a FOMO type trade. Better economic data releases in the US also produced a move higher in risk assets. US Retail Sales beat the expected 5.8% and the previous -2.7% to come in at 9.8%. Core Retail Sales beat the expected 5.1% and the previous -2.5% to come in at 8.4%. The Philly FED Manufacturing Index beat the expected 41.0 with a read of 50.2 but stayed below the previous 51.8. US Unemployment Claims fell to 576K from 703K forecast and 744k previously which was revised up to 769K. Empire State Manufacturing came in at 26.3 beating the forecast of 19.3 and the prior read of 17.4. US Industrial Production fell to 1.4% against an expected 2.7% and a previous -2.2%. US FED Member Bostic said yesterday that the FED would not pre-emptively slow the economy to avoid overheating. FED Member Daly said that it was critical to shore up the stability of hedge funds and money market funds. She also said that low rates over time lead financial firms to reach for yield. She added that central clearing for Treasury cash markets could lessen liquidity crunch and the FED needs to careful study of Treasury market reforms. She said that the hard work would begin in the economy after H2 this year and that the FED will need repeated months of good data before changing policy, and the economy is not producing this yet. She said the FED will watch a range of underlying inflation measures to look for signs of gradual pickup. She also said that a little wage growth would be a good thing and the FED needs to be 'diligent' about bringing workers back to labour market. FED Member Mester said that the economy is still far from central bank's goals for maximum employment and price stability but progress is being made and the economic outlook is brightening. She said that the sizable support from fiscal and monetary policy and vaccination deployment point to a pickup in activity in the second half of this year. The Japanese 225 has closed higher by 0.14%. The Hang Seng is trading up 0.9 % while the Shanghai Composite is trading up 0.9%. Gold is trading at 1764.00 while USDJPY is trading at 108.860.

This morning the Eurozone Final CPI is expected to stay at 1.3%. This afternoon, Canadian Housing Starts are expected to rise to 254K from 246K. US Housing Starts are expected to come in at 1.60M from 1.42M previously. US Preliminary University of Michigan Consumer Sentiment is expected to rise to 88.9 from 84.9 which was revised up from 83.0.

USDCAD

The USDCAD pair is now trading around the 1.2523 level having fallen back from the March high of 1.4668 and having broken supports around 1.3000/1.2950. The falling trend line may be used as resistance and is positioned at 1.2717 below potential resistance at 1.2800. Ahead of these levels, the 1.2700 area may act as resistance followed by 1.2688 and 1.2600. The pair broke support early last month at 1.2830 and this level may be used ahead of resistance at 1.2880, 1.2900 and 1.3000, followed by 1.3100. Resistance may also 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 was broken around the 1.2590 level from January and the market is backing away from this level. Below the current level, the 1.2520 level and 1.2500 area support is followed by the 1.2470 area which may be used as support as it was in February and these will be key areas for traders to watch. The low this week came in at 1.2476. Traders may use to area to lean on if higher lows are formed. From there, sellers may unlock lower levels at 1.2435 and 1.2400. The low yesterday came in at 1.2365 and this area is followed by possible support at 1.2344. From there the 1.2300 round number comes into focus with the 1.2250 area potentially being tested if the round number is broken.

US 500 Index

The US 500 Index price is currently trading around the 4166.00 area after breaking higher yesterday through 4150.00. The market found resistance at 4174.00 and moved back under 4170.00. The 4180.00 area may be resistive. Beyond this area, the 4180.00 comes into play followed by 4200.00 and 4213.00 forming a large resistance area. Beyond this area, 4220.00 may be resistive followed by 4250.00 and 4275.00.  Support may be seen at 4130.00, 4100.00 and 4064.00 followed by 4026.00 and 4000.00. A loss of this area may open the way to 3988.00 and the 3950.00 area. 

Support may be seen at 3900.00 followed by the 3885.00/3870.00 area.  A breakdown through 3850.00 may see a rapid move down to 3800.00 followed by the 3750.00 level. The trend line is in place at 3742.00. The 3700.00 round number may also offer support and this is potentially an area to watch which includes the 3715.00 support level. The 3700.00 level is followed by 3661.00 and 3650.00. Further support may come into play around 3644.00, 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. 

Philip Konchar

Core Spreads

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