USD/CAD – Reversals On Route ?

Backtracking to our “Oil Super Cycle In Motion” article published on the 10th of March, we have seen major movements in the Dollar as well as some price action to cover on Oil.

PRIOR ARTICLE ANALYSIS

Looking to the left, we have USD/CAD where price was consolidated within a daily range as we awaited further downside and to the right we have Oil after its hot run from the beginning of March.

THIS WEEK’S PRICE ACTION

The prior article price action has been marked up with a vertical line. As we can see USD/CAD broke the consolidation and had a continuation to the downside. However, when we look at Oil, this didn’t translate to extended highs. On the 18th of March, we saw Oil break down with closures back below the $60 handle. This in part, triggered a lower low formation on USD/CAD and began the retracement back towards consolidation.

From here we ranged for roughly a month before seeing Oil break higher and USD/CAD broke lower. Oil hasn’t seen as strong of a move in comparison to the currency pair, however this is due to DXY price action.

DXY DAILY TIMEFRAME

As expected we had an extended push higher after seeing our first push into resistance on the DXY. We see a retracement into the 78.6% fibonacci level which coincides with USD/CAD creating the lower low and retracing back towards our boxed off consolidation.

Once this resistance held and formed a clear lower high, we have seen further downside on DXY back into an extremely important level of support which will prove pivotal in the coming weeks/months.

DXY MONTHLY TIMEFRAME

Should we clear this monthly support, the path forward will be rocky for the US Dollar.

USDCAD WEEKLY TIMEFRAME

Analysing the weekly timeframe on USD/CAD, we can see a decisive bearish close followed by multiple wick rejections into the 50% fibonacci level. As we can see, price has now reached our 2nd fibonacci extension of -61.8% where we look to take profits. This coincides with DXY beginning to find support.

USDCAD 4HR TIMEFRAME

Applying a fib from the wick rejections off the 50% down to the lows, we have 2 fibonacci levels where we will monitor for retracements as well as a minor level of resistance inline with the descending trendline dating back to March 2020. As we can see, price has not made a higher high yet so we will need confirmation in a structural break before acting on this potential move higher.

Fundamentally, we have seen US oil inventories come in today at -1.7M, beating forecasts of -1.0M and a previous figure of +1.3M. Iranian oil exports have also been forecasted to only restart in October causing more supply shock and upside for Oil prices.

On the other hand, we also see fears of inflation drift slightly as the FED reaffirm their transitory outlook. This may put pressure on Oil prices, so we will be keeping a close eye on the inflation narrative. Inflation expectations are essentially a mirror of the Oil prices.

US INFLATION & OIL PRICES

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INDICES MARKET OUTLOOK – 24 MAY 2021

The US equities market enjoyed a slight rebound last week on the back of positive economic data pointing towards a recovery within the US economy. Investors will keep an eye on this week’s fundamental docket as inflation continues to weigh on market sentiment. 

Friday saw The flash Markit US Composite PMI Index coming in at 68.1, beating our last month’s reading of 63.5. The Dow Jones was mainly affected by this as investors are looking to rotate out of growth stocks into value stocks. It is worth noting that this is a record high for the PMI gauge which hints towards a full-blown recovery for the US economy as this is boosting reflation optimism in the market. 

This week’s most influential risk event comes in the form of US Core PCE Price Index on Friday as well as US GDP readings on Thursday as investors continue to gauge on the direction of the US economy as well as the Fed’s stance towards potential tapering. Friday also brings us the weekly Jobless Claims data as we look to see if the employment market remains at steady post-pandemic levels.

FUNDAMENTALS FOR THE WEEK AHEAD

Having a look at NASDAQ on the daily timeframe, we can see that price managed to find a form of dynamic support around our ascending trendline to create the low of last week before taking price higher. At the time of writing, price is currently trading just below the Prior Weekly High as well as a zone of resistance stemming from early February.

NASDAQ DAILY TIMEFRAME

Dropping down to the 4 Hour timeframe, the first thing that is noteworthy is the fact that we have had a bullish break of structure and a perfect retracement around the Aspire Profit Pocket before price made a move to the upside. We’ve also had the break and retest of the 4H descending trendline. Should NASDAQ continue to follow bullish structure, we will simply wait for the next Higher Low to take price higher potentially into the $13 700 region before seeing another pullback. Any closures below the Prior Weekly Low would invalidate my long bias. 

NASDAQ 4 HOUR TIMEFRAME

Moving onto the Dow, we can see last week’s low was created in the form of a 78.6 Fibonacci retracement which was bolstered on the back of positive economic data for the US coming into the end of last week. Price struggled to clear the Prior Weekly High which gives me a sign of potential fading bullish momentum. A break and clear above the previous week’s high would confirm a further move to the upside i.e creating a Higher High, but at the time of writing, it will be treated as a potential level of resistance. 

US30 4 HOUR TIMEFRAME

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Indices Market Outlook – 17 May 2021

The US equities market closed lower last week as inflationary data came in higher than expected sending treasury yields higher. The Dow Jones, S&P500 and NASDAQ closed at -1.14%, -1.39% and -2.34% respectively as they managed to recover for most of Friday on the back of Retail Sales coming out lower than expected which seemed to cool Fed tapering fears and sent equities higher into the close of the week. 

In terms of event risk for the week ahead, traders will be keeping their eyes peeled for Wednesday’s FOMC Meeting Minutes as they look to gain more insight regarding inflationary fears. Rapidly rising wages and prices are indicating a constraint on economic recovery which in turn weighs on consumer confidence within the markets. Thursday also brings us Initial Jobless Claims which always give us an idea of how the recovery of the job market is going. 

FUNDAMENTALS THIS WEEK

Looking at NASDAQ on the Daily timeframe, price managed to find a form of dynamic support on the ascending trendline stemming from November and March swing lows respectively before managing to close above the low printed in April. This could either be on the back of Retail Sales coming in lower than expected on Friday or simply retail traders adopting the “Buy the Dip” mentality. 

NAS DAILY TIMEFRAME

From a 4 Hour perspective, NASDAQ is currently bearish printing Lower Lows and Lower Highs with a potential inflection zone around the $13 600 region. At the time of writing, price is approaching our descending trendline in line with the 78.6 Fibonacci retracement level as well as a previous zone of resistance stemming from January. The last point of call for a potential bearish continuation would be the Aspire Profit Pocket (88/93 Fib region). A break and closure above $13 850 would invalidate any short setups and could open up room for NAS to make new highs should it play out. 

NAS 4HR TIMEFRAME

With regards to the Dow, price eventually collapsed last week after the Dow made a new All Time High around the $35 100 region. We’ve seen a slight recovery in price on the back of the retail sales data easing tapering fears as previously mentioned. At the time of writing, price is trading around the 61.8% fib level and reaching a potential zone of support to take it higher. Traders will be eyeing deeper fib retracement levels for better a better risk to reward on short positions. Wednesday’s FOMC Meeting Minutes could also act as a potential catalyst as we wait for the Dow to find a true direction.  

US30 4HR TIMEFRAME

Traders will be eyeing the $4200 region on the S&P as we look to see if the previous ATH will hold as resisitance in line with the Aspire Profit Pocket to take price lower. A break and close above the previous ATH could indicate buying pressure is still present and would invalidate any short positions for the time being. 

S&P500 4HR TIMEFRAME

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Indices Market Outlook 12/04/21

The US equities market closed higher on Friday with investor confidence being boosted on the back of positive economic data as well as reflation hopes being led by President Biden’s stimulus package. The NASDAQ, S&P500 and Dow Jones closed +0.51%, +0.77% and +0.89% respectively. 

There has been a seasonal downtrend in volume and volatility with price being somewhat steady. The VIX Fear Gauge is trading at pre-COVID levels suggesting that the waters are calm for now. With Earnings Season kicking off this week, we could see an uplift in volume and volatility as it could give us a clue about possible economic recovery. Wednesday sees major financial institutions such as Wells Fargo, JPMorgan, Goldman Sachs and Bank Of America releasing their Q1 reports. 

APRIL EARNINGS CALENDER

A string of positive quarterly results could trigger an extended bull run after recent upbeat economic data ranging from NFP to consumer confidence. With the stimulus-led reflation hopes boosting investor confidence, key risk events to keep an eye on for the week are US Core Inflation on Tuesday as well as Retail Sales on Thursday. The result of Retail Sales will affect the Bond Market as well which in turn will affect the stock market. We also have Jerome Powell speaking on Wednesday at the Economic Club of Washington. 

FUNDAMENTALS THIS WEEK

Technically, we saw the S&P500 continue to grind higher as price has managed to break that psychological level of $4100 with no clear signs of a bearish reversal just yet. Since the S&P is trading at All Time Highs, there is no immediate level of resistance. With price continually rising, some form of a technical pullback is inevitable. Should pullbacks occur, the ascending trendline stemming from swing lows in March as well as the psychological level of $4000 would provide a good risk to reward ratio on a potential long position to take price higher. 

S&P 500 4 HOUR TIMEFRAME

We’ve seen similar price action on the Dow as price has continually made Higher Highs and Higher Lows showing bullish momentum. Pullbacks are inevitable as price has still not shown any signs of a reversal just yet. Pullbacks into one of our Fibonacci retracement zones in line with a level of support as well as the psychological level of $33,400 is the main theme this week as we keep an eye on the event risk lined up for the week.

US30 4 HOUR TIMEFRAME

The tech-heavy NASDAQ continues to trade close to its All Time High posted in February with price creeping closer and closer. The first immediate level of technical resistance would be said All Time High and if price does not manage to break this high, we can look for price to pullback and test March 2021’s high before potentially reaching that psychological level of $14,000 and higher. 

NAS 100 4 HOUR TIMEFRAME

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S&P500 CRACKS $4000

The S&P has managed to eventually surpass the $4000 level amidst impressive economic data being released. The Dow Jones has also seen bullish momentum bringing it ever closer to that $34,000 psychological level with building risk appetite playing a factor.

Should economic data continue to impress, this could be enough of a catalyst to trigger a continuation across US Indices. Last week brought us NFP which provided us with an optimistic outlook on the US economy alongside Consumer Confidence. The consensus seems that the US economy is slowly growing and going back to normal with some extra help from President Biden’s $1.9 trillion stimulus relief package.

LAST WEEK’S FUNDAMENTALS

Although US indices might have stumbled going into the end of Q1, the overall theme seems positive. With inflation still being a hot topic, rising yields are still a threat to the stock market. With NASDAQ being so tech heavy, the losses seen there will greatly outpace that of the S&P and Dow, with the latter being well-positioned for Biden’s Infrastructure Bill. For the week ahead, we have already seen positive ISM data boosting investor confidence. Investors will be eyeing data from Initial Jobless Claims as well as PPI to gain a clearer picture on where the economy could potentially be going. 

FUNDAMENTALS FOR THE WEEK

Consolidation is healthy amidst broader uptrends. Pullbacks are inevitable even though the stock market is designed to grow and go up. For the S&P specifically, the crack of $4000 does indeed open the door for a new leg to be formed to the upside pending a pullback. Price is continually making Higher Highs and Higher Lows in the bigger scheme of things showing us that bullish momentum is still very much prevalent. It’s time to exercise patience as we await pullbacks in price into one of our marked out technical levels such as our ascending trendline stemming from swing lows from November and March respectively. The psychological level of $3950 could also provide price with a region of support to take price higher.

S&P500 DAILY TIMEFRAME

Technically, the Dow has been showing us similar signs of bullish momentum. As previously mentioned, pullbacks in price is normal and healthy before seeing price create a new leg. In the case of the Dow, pullbacks are bound to happen as well. We could look at the Prior All Time High as the first region where price could run into some form of support. Should we break this, the next level to keep an eye out for would be the psychological level of $33,000.

US30 4HR TIMEFRAME

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Market Outlook 29/03/2021

The past two months in the equities market has shown a clear divergence between the tech-heavy NASDAQ and the blue chip Dow Jones. We’ve seen pandemic winners such as information technology being swapped out for cyclical names such as energy, material and the financial sector. Since the beginning of February 2021, the Dow Jones has gained 8% and the NASDAQ has fallen -3.2%, at the time of writing.

This transition into more stable and lower yielding earners makes sense as we’ve seen the rollout of the Corona Virus vaccine take place, upbeat economic data releases and we’ve also had the passing of President Biden’s $1.9 trillion stimulus package. Overall, this shows signs of the US economy slowly recovering and making its way from digital services back into face-to-face services. 

DOW VS NAS FEB – MAR 2021

In terms of Fundamentals for the week going forward, all eyes will be watching for Friday’s NFP results to gauge on where the labour market could potentially be headed its result for the Fed’s interest rate path. Wednesday brings us the ADP NFP results as well as Pending Home Sales. Then on Thursday, an eye should be kept out for Initial Jobless Claims as well as the ISM Manufacturing PMI results. It should be important to note that with March coming to an end this week, the markets could be in for a rough time with Quarterly results being filled in. 

FUNDAMENTALS THIS WEEK

Technically, NASDAQ is not out of the water yet with a clear trend direction. A note should kept how the Monthly candle closes on Wednesday with the previous two months rejecting the highs.

NAS MONTHLY TIMEFRAME

For the week going forward, price is still showing bearish momentum on the 4H timeframe. Plotting our Fibonacci tool from Lower High to Lower Low, it will be a waiting game as we look for potential signs of reversal around one of our retracement zones as well as the descending trendline and the psychological level of $13 000 to act as resistance. A break and clear of $13 200 would invalidate any bearish setups for now. 

NAS 4HR TIMEFRAME

Last week Thursday and Friday brought the bulls back into play on the Dow as we saw price momentarily dip into the Previous All Time High before rocketing back into the highs. Technically for the week going forward, it would be interesting to see if price manages to break the prior weekly high and new ATHs are on the cards or if the current ATH maintains and we  see a Lower High formed. Should the latter of the two scenarios take place, the first levels of potential support are around $32 750 and $32 400 respectively.

US30 DAILY TIMEFRAME

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SUEZ CANAL – DAYS OR WEEKS?

In todays blog at AspireFX we are going to be covering a worldwide hot topic; the 220 000 ton mega ship, the Ever Given that’s blocking the Suez Canal. 

Suez Canal

A sand storm and high winds causing a lack in visibility is said to be the reason behind this enormous vessel getting lodged into the banks of the Suez Canal on Tuesday evening while entering from the Red Sea. The ship is lodged diagonally, blocking traffic flow from both ends. Tugboats and diggers have been working for hours on end to free the mega ship, but are up until this point, still unsuccessful. 

This has an enormous effect on the trade between Europe and Asia as well as world trade. This canal is responsible for 12% of all seaborne trade and has now been closed until further notice. This massive ship is said to have 20 000 containers on board carrying anything from clothing to furniture. Specialists have a plan to use helicopters to remove containers off the ship to lighten the load, however, this is an extremely difficult rescue task because by removing the wrong amount of weight from the incorrect side of the could possibly result in the ship breaking in half. 

Over 200 container ships are anchored and waiting on a solution. They are all faced with two options, one being to wait and hope that this problem is resolved quickly even though its said that it could take weeks to resolve, or they could take an alternative route around Africa which adds a minimum of 5-6 days onto their trip and for some ships extra costs amounting up to $500 000. Taking the trip around Africa has the risk of pirate attacks added to the extra 30% shipping time making it even more of an unfavourable option. The pause in supply is having a huge negative effect on global trade which was already under immense pressure from the effects of the Covid-19 pandemic. 

There are currently 2 Japanese Special Rescue teams that are on the scene planning a way to clear up the traffic and get the huge vessel out of the spot its currently in and back into deeper water where it can move freely. 

There are an estimated 13 million barrels of oil stuck on board the Ever Given, this adding immense pressure on supply causing a spike in the already rising oil and gas prices seen due to the previous lag in production caused by the pandemic and supply shock. On Wednesday, one day after the huge vessel was stuck, the price of oil was already up 6%. This black swan event adds fuel to the growing expectation of an oil super cycle.

USOIL 4HR TIMEFRAME

The news of this canal being blocked drew big buyers into the oil market and alongside other economical factors this lead to Brent Crude’s one-month futures contract gaining its biggest one day gain in near a year. This blockage is effecting the oil market immensely as between 5-10% of all seaborne oil is transported through the Suez Canal, causing a delay of about 3-5 million barrels of oil per day. 

With the enormous pressure this puts on global trade and the estimated $9.6 Billion delay on goods that’s occurred daily, there is however still hope for the situation as multiple countries have stepped forward to help free the boat from the banks of the Seuz Canal including Boris Johnson stating that they will have his support. There is also extremely rare high tides coming in this weekend which also leaves hope for the water levels to rise high enough to assist the Diggers and Tugboats in freeing the vessel, but this is not a definite solution it is hopeful. 

Remember to subscribe to our blogs to receive them directly to your email! We hope you have a great weekend and we’ll be back on Monday. 

Death Of The Dollar?

Since our last article on the Dollar, we have seen the bullish push into the weekly level of 92.50, with Bulls still eyeing the 93.00 handle as the next upside target. Optimism around declining cases, reopening of the economy, vaccination rollouts & the anticipation of rate hikes have seen Bulls take hold in the first quarter of 2021.

QUARTERLY TIMEFRAME

Taking a look at the 3 month timeframe, we have interesting price action being printed since ’85. We have seen 2 drives into the lows with the 3rd drive high being printed in the wake of covid. With 25% of all dollars being printed in the last year, devaluation of the dollar is highly anticipated. With average lifespans of fiat currencies being 27 years, has the Dollar overstayed its welcome coming into its 107th year since being created?

Staying on the quarterly for a moment, it is important to envision how the yearly candles would open and close. Generally we see a wick on either end of a candle. Looking at the first quarter of 2020, we see upside in and above the parity level of 100.00, creating a wick high before seeing the dollar roll over for the remainder of the year.

Now, looking at the current first quarter of 2021, we have seen upside into 92.50 which may form a wick high following the $1.9 Trillion stimulus package and the upcoming infrastructure package on the horizon.

Durable Goods data came in negative at -1.1% vs the expected 0.7%. This is defined as products with a life expectancy of more than 3 years (automobiles, computers, appliances etc). The reopening of the economy remains a positive theme in the markets, however these figures may signal a slower than expected rise in production. It is important to note that these are preliminary numbers.

Flash Manufacturing came in at 59.0 vs the expected 59.6. This figure is negative, however still in expansion territory, being above 50.0. Fed Chair Powell testifies at the time of writing alongside the treasury secretary Janet Yellen. Investors will be lending an ear incase we find any more clues or future outlooks from the Fed.

WEEKLY TIMEFRAME

Taking a look at the DXY on the weekly timeframe, we can see the consolidation boxed off from March when we had the declaration of a global pandemic. Price action was extremely indecisive and choppy until we saw a breakout in June. Since then we have had clear direction on the Dollar as we continue to slide. Above we have hi-lighted the retracements seen with arrows. We will be monitoring the 92.50-93.50 handle for wick high formations, creating the next lower high to take the Dollar lower.

DAILY TIMEFRAME

Looking at the daily, we are piercing into resistance once again coinciding with the 61.8% fibonacci. The 93.50 handle mentioned above also lines up with the 78.6%. In the short term, there is potential for extended upside, however we are awaiting clear reversal signs for downside on the US Dollar. A closure above these levels and more importantly, 95.00 will signal a strong bounce back in the Dollar and invalidate shorts.

Fundamentally, we have no more data releasing today however we do see FOMC members speaking at 7:35PM, 9:00PM and 01:00AM respectively. Tomorrow we have the release of the final GDP q/q, unemployment claims and more FOMC talks. Friday will end the week on an interesting note as we see Core PCE data, personal income & spending m/m and the revised consumer sentiment & inflation expectation coming from the University of Michigan.

We hope today’s blog was thought provoking and provided valuable information on the way forward for the Dollar. As always, exercise risk management and we hope you have a great week further. For more updates like the one above, subscribe to our blog.

Market Outlook 22/03/21

US equities were treated to a week full of fundamentals as we had an FOMC meeting which could be the catalyst to send the stock market on its way to new all time highs or could be the catalyst to send tech stocks even lower.

US Fundamentals This Week

Last week saw Fed Chairman Jerome Powell come out and reiterate the Fed’s accommodative policy path. This week however, slows down slightly in terms of economic event risk. At the time of writing, we saw Existing Home Sales come out negative for the dollar. All eyes will be waiting for Thursday, which will bring a good amount of volume and liquidity to the Indices market with GDP as well as Initial Jobless Claims data being released. Friday also brings us Core PCE, the central banks preferred measure of inflation. Should we see any further restraint on the bond market, this could be the green light to send yields even higher. We saw yields climb as high as 1.73%, the high it created in January 2020 before the worldwide lockdown. At the time of writing, the 10 Year Treasury Yields are sitting at 1.68%, still hovering close to the 1.7% region.

10YR TREASURY YIELDS 4HR TIMEFRAME

Technically, NASDAQ is reaching a very crucial inflection zone around the $13 200 region which we saw price struggle to break through last week. With big banks and hedge funds keeping a close eye on the Treasury Yields, we could see a continued sell-off within tech stocks as large firms continue to liquidate their money in technology stocks and rotate into more industrial stocks within the Dow Jones for example. Monday brought us a green day for the NASDAQ with a 2% gain at the time of writing. A key level to keep an eye on throughout the week will be the region of $13 200 once again as we wait to see if price will manage to create a new high.

NASDAQ DAILY TIMEFRAME

With regards to the Dow Jones, we’ve seen the eventual pullback in price after we saw US30 gain insane bullish momentum once President Biden signed the $1.9 trillion Stimulus Deal. Monday saw price dip into the $32 500 region, but it will be interesting to see if price manages to pullback into the psychological level of $32 000, or if we will see price continue to rally in weeks to come on the back of all the current fundamentals taking place. 

US30 4HR TIMEFRAME

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The Rand Recovery

The Rand has maintained a certain degree of strength against the dollar amidst a week of various fundamentals resulting in the Rand managing to end the week positive.  

On Wednesday, SA Retail Sales data came in worse than expected at -3.5% versus the forecasted -2.7% resulting in the Rand weakening against the Greenback. Wednesday also brought us the FOMC Interest Rate Decision which saw the FED deciding to leave their rates unchanged as well as deciding to leave Quantitative Easing (QE) at $120 billion. The main theme we can take away from this is a weakening of the dollar due to QE increasing supply and therefore devaluing the Greenback sending the DXY lower.  Despite South Africa still feeling the effects of the Corona Virus pandemic and Eskom coming under fire due to continued rolling blackouts, the Rand has managed to find support around the R14.65 level at the time of writing. Fundamentally next week, we have CPI and Core CPI data coming out for South Africa as well as GDP and Initial Jobless Claims for the Dollar.

Looking at the DXY, the Dollar has managed to creep back into the 92% level which has sustained itself as a level of resistance in the past. Should this level continue to hold as resistance coming into the end of the week, we could see pullbacks on the Dollar over the course of next week which in turn could send USDZAR lower. Should price manage to break this level, we would await a retest of 92 as support which would send the Dollar higher. 

DXY 4 HOUR TIMEFRAME

Technically, USDZAR has been trading between the R15 and R14.60 level for the week with price finding dynamic resistance around our long term trendline stemming from highs created during the initial Corona Virus lockdown. Price is maintaining it’s downward momentum creating discreet Lower Lows and Lower Highs with no real signs of a reversal to the upside just yet. 

USDZAR DAILY TIMEFRAME

Going forward, key areas to monitor would be the level of support around R14.60 as well as the long term trendline which could potentially continue to take price lower with the psychological level of R14.00 being the next target to the downside for the Rand. 

Coming to the end of the week, we have seen great opportunities in the market so far to capitalise on. With liquidity being lower today we will be monitoring the weekly and daily closures for the week ahead. As always, exercise risk management & we hope you had a great week & an even better weekend ahead. For updates directly to your email, subscribe to our blog.