North American News
Major indices close higher for the 2nd consecutive day
- Modest gains in the major indices today
The major US indices are closing higher for the 2nd consecutive day. Having said that, the gains were relatively modest as traders await the Fed decision tomorrow.
The final numbers are showing:
- Dow industrial average is up 67.27 points or 0.20% at 33128.78
- S&P is up 20.08 points or +0.48% at 4175.47
- Nasdaq is up 27.75 points or 0.22% at 12563.77
- Russell 2000 is up 15.94 points or 0.85% at 1898.85
March US factory orders +2.2% vs +1.1% expected
- March factory orders, including revisions to durable goods orders
- Best since May 2021
- Prior was -0.5% (revised to +0.1%)
- Ex transport +2.5% vs +0.4% prior (revised to +1.0%)
- March durable goods orders reversed to +1.1% vs +0.8% prelim
- Durable goods orders non-defense ex air +1.3% vs +1.0% prelim
Commodities
Gold Price Forecast: XAU/USD traders are sidelined ahead of the Fed
- Gold bulls are stepping in at a weekly demand area.
- The Fed is anticipated for the week ahead and is keeping traders sidelined.
At $1,871.10, the gold price is firmer on Tuesday, rising from a low of $1,850.47 to a high of $1,878.14 so far. The price has upheld the bid in synch with a slight retreat in US Treasury yields and the US dollar ahead of this week’s Federal Reserve went.
The US benchmark 10-year Treasury yields drifted away from the 3% level on Tuesday, marking a low of 2.915% so far. Meanwhile, the dollar index, DXY, was down 0.16%, making bullion less expensive to other currency holders.
All eyes on the Fed
Investors are in anticipation of the Fed and expect the central bank to hike rates by 50 basis points at the end of a two-day meeting on Wednesday in order to combat soaring inflation. Traders will be looking to the comments by Chairman Jerome Powell for further clues on future rate hikes.
If the outcome of the FOMC meeting is more hawkish than expected, gold could come under pressure again while a more dovish than expected outcome and ongoing concerns for geopolitics could see the safe haven quality of gold appealing to investors.
Analysts at TD Securities argued that ”gold prices are still vulnerable to a positioning squeeze, with both CTA trend followers and technicians set to liquidate additional length below the $1840/oz range.”
”The bar is low for additional outflows in the yellow metal, but tomorrow’s knee-jerk reaction may also whipsaw traders with the Fed’s move well telegraphed, notwithstanding the elevated anxiety levels,” the analysts concluded.
As for the greenback, it came under pressure against a basket of currencies on Tuesday, as investors start to move to the sidelines ahead of the Fed. With inflation running at its fastest pace in 40 years, DXY hit a 20-year high at the end of last week’s business on expectations the US central bank will be more aggressive than its peers while expecting a stronger US economy than that of the eurozone.
Additionally, a gauge of global equity markets rose slightly on Tuesday. MSCI’s gauge of stocks across the globe (IACWI) gained 0.23% and the pan-European STOXX 600 index (.STOXX) rose 0.09% after surviving a “flash crash” on Monday in Nordic markets caused by a sell order trade by Citigroup. nevertheless, it is a bit more of a chop on Wall Street in late mid-day trade with both the NASDAQ and Dow Jones in the red while the S&P 500 is just about hanging on in the green.
WTI consolidates in mid-$104.00s as traders weigh China demand woes against expected EU/Russia oil embargo
- WTI is consolidating in the mid-$104.00s, near the middle of its recent short-term $100-$108ish range.
- Traders continue to juggle the bearish theme of China lockdown worries with the bullish theme of an EU/Russia oil embargo.
Since the start of Tuesday’s European session, front-month WTI futures have been swinging between lows in the $103.00 per barrel area and highs in the $105.00 area, as traders weigh the prospect of an impending EU embargo on Russian oil imports against China lockdown concerns. At current levels in the mid-$104.00s, WTI is trading ever so slightly in the red on the day and is around the midpoint of its $100-$108ish ranges of the past five or so sessions.
The news coming out of China suggests that authorities are continuing to struggle to get a Covid-19 outbreak in Beijing under control, with a further 51 infections reported on Tuesday. Restaurants in the Chinese capital are now closed for indoor dining, apartment blocks where cases are being picked up are being put under quarantine, residents of the city are being encouraged not to leave and the reopening of schools has been postponed for at least a week after the Labour Day holidays, local press reported.
If Beijing follows down the same path as Shanghai, i.e. goes into a strict city-wide lockdown, this will further dent already diminished crude oil demand in China, a big downside risk that WTI traders must monitor. However, traders must juggle this against an announcement of an EU-wide embargo on Russian oil imports that is likely to be confirmed later this week. According to Internation Energy Agency forecasts, Russian output has likely already fallen by 3M barrels per day this month versus prior to the country’s invasion of Ukraine as a direct result of Western sanctions.
“A potential EU-wide oil embargo could significantly undermine the already diminishing availability of Russian barrels,” said one analyst at oil broker PVM. For now, Russia output fears are preventing WTI from falling back below $100 due to China demand woes. Aside from the aforementioned themes, WTI traders will also be watching upcoming US Private Weekly API crude oil inventory data out at 2130BST on Tuesday ahead of official US inventory numbers on Wednesday. Attention will then turn to the broader macro backdrop, with oil traders likely to monitor how risk appetite responds to this week’s Fed meeting and US jobs report.
EU News
European equity close: Moderate rebound after the flash crash
- Closing changes for the main European equities
- Stoxx 600 +0.4%
- DAX +0.6%
- UK FTSE +0.1%
- French CAC +0.6%
- Spain IBEX +1.4%
- Italy MIB +1.5%
Other News
Buy the dip isn’t dead yet
- There were big inflows last week
The stock market continues to zig-zag ahead of the FOMC. We’ve seen a series of quick declines followed by impressive bounces. Ultimately, that kind of volatility exhausts the bulls but here’s an important chart.
Bank of America today noted that during last week’s 3.3% decline in the S&P 500, clients were net buyers of US equities for a third consecutive week. That included the biggest inflows since early December. It was led by institutional and hedge fund buying. There’s an idea out there that the Fed needs to kill the animal spirits in the stock market to bring inflation back into balance. I don’t buy that but this is an indication that buy-the-dip isn’t dead yet.
Cryptocurrency
Bitcoin tests recent swing low levels
- The low on Sunday reached $37400
The price of Bitcoin has been trading more up and down of late but with the price action below the $40000 level. The last time the price traded above the $40000 level was on April 28th. On that day the price spiked up to $40400 and rotated back to the downside fairly quickly. Since then, the falling 200 hour moving average has been acting as resistance.
On April 29, the price tried to move above the 200 hour moving average, but quickly rotated back to the downside. During yesterday’s trading, traders made two attempts to move above the 200 hour moving average only to find willing sellers on each attempt. Sellers are more in control.
In trading today, the lower 100 hour moving average was breached on a few hourly bars, but like the 200 hour moving average momentum to the upside was quickly stopped, and the price rotated back to the downside.
The last five or six hours has seen the price move below swing levels on April 26 and May 1 near $37,697.13. The low price has reached $37,560 (it is trading at the low as I speak). On the downside, the swing low from May 1 comes in at $37,400 and is the next downside target. A move below that level opens up the door for further downside momentum.
Looking at the daily chart below, swing lows for the year came in at $34,324 on February 24 and $32,950 on January 24. Also watch $36,369 as an interim support target on weakness.
Of note from a bearish technical perspective on the daily chart, is that the last swing high from April stalled right near the 200 day moving average.
Also since April 11, there have only been two closes above its 100 day moving average (currently at $40,995). It would take a move back above the 100 day moving average to shift the bias in the long-term more toward the upside. Until then, the sellers are more in control on the daily chart.