USDCAD and US 500 Index

The markets made a dramatic move lower yesterday from key resistance but recovered to finish not far from the highs. The post FOMC market was of a volatile nature with strong moves across stocks, FX and Bonds as key areas were tested. The end of month rebalancing also played a factor while the US President’s address to Congress on Wednesday night also played a part. The risk-off mood has been aligned in some quarters with a short-term peak in the market as the US500 Index approaches the key 4220.00/4250.00 resistance area. Many of the leading investment institutions are predicting a short-term pullback in equities of between 5% to 10% in the near term. However, the longer-term outlook remains extremely positive with key resistances broken and strong liquidity available to markets in the months ahead. The FED were once again concrete in their assertion that they would provide support to the economy and to markets until their targets were met. This is placing a backstop under the market and setting up a buy the dip mentality amongst investors and traders. The reopening of economies in the US and UK is also prompting a brighter outlook despite large parts of Europe, Canada and the rest of the World under lockdown. The markets outside of Asia are essentially ignoring the crisis in India which has the ability to spill over to other countries in the region and further afield. However Asian markets are in tune with the crisis and are carefully monitoring the spread of the Indian variants. Over 18 million cases have been reported in India since the start of the pandemic last year and there were 379,257 cases reported yesterday alone. The US, the UK and Europe are just some of the places sending vital medical supplies to help the stricken country. The BioNTech CEO stated yesterday that he expects the vaccine the company developed with Pfizer to be effective against the Indian variant but that the company won’t know for sure until it has more data. The Japanese 225 has closed lower by -0.83%. The Hang Seng is trading down -1.6% while the Shanghai Composite is trading down -1.0%. Gold is trading at 1771.00 while USDJPY is trading at 108.780.

This morning the Eurozone Preliminary Flash GDP is expected to print at -0.8% from -0.7%. Eurozone Unemployment is expected to remain at 8.3%. This afternoon, Canadian GDP is expected to fall to 0.5% from 0.7%. US Chicago PMI is expected to fall to 65.4 from 66.3. 

USDCAD

The USDCAD pair is now trading around the 1.2287 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 1.2690 below potential resistance at 1.2800. The 1.2300 may offer resistance in the short term followed by 1.2460 and 1.2500. Ahead of these levels, the 1.2688 area may act as resistance followed by 1.2653 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. The 1.2500 area may set up as resistance in the short term but support may be found around 1.2260 in conjunction with the 1.2250 area a key level for traders to watch. Traders may use to area to lean on if higher lows are formed. From there, sellers may unlock lower levels at 1.2230 and 1.2200. The 1.2175 area may be supportive and this area is followed by possible support at 1.2150. From there the 1.2100 round number comes into focus with the 1.2160 area potentially being tested if the round number is broken. This is followed by the 1.2000 area. 

US 500 Index

The US 500 Index price is currently trading around the 4201.00 area after a choppy week of trading. The market found resistance at 4218.00 yesterday and moved back under 4200.00. The 4220.00 area may be resistive. Beyond this area, the 4225.00 comes into play followed by 4240.00 and 4250.00 forming a large resistance area. Beyond this area, 4260.00 may be resistive followed by 4270.00 and 4275.00.  Support may be seen at yesterday’s low of 4176.00 followed by 4150.00. The 4130.00, 4100.00 and 4064.00 levels are followed by 4026.00 and the 4000.00 round number. 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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