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Markets are cautious ahead of Trump presser

Market Overview

Markets increasingly cautious as the exuberant rally that ended 2016 on such a positive note in the wake of Donald Trump’s victory has given way to a far more reticent outlook. The drop away in Treasury yields has stunted the dollar rally and now equities have also moved into consolidation mode. The markets have digested the final speech of Obama as President and are cautious as traders look towards a press conference by Donald Trump today in the hope of furtherclues over the direction of fiscal policy which has had so many hopes pinned to. If the press conference does not give direction to the markets then this consolidation could continue to Trump’s inauguration next Friday (although Janet Yellen’s speech tomorrow night could also help to drive some direction). Once more today there is little real direction on major forex pairs, whilst equities are mildly weaker.
The mixed close on Wall Street had the S&P 500 closing dead flat at 2269, whilst Asian markets were mixed to slightly higher with the Nikkei +0.3%. European markets have opened mildly lighter as the caution continues. Forex markets show the ongoing consolidation with very little direction on the majors and only slight weakness on the yen being notable. Gold is managing to continue to squeeze higher towards the key old breakdown around $1200, whilst oil is stable following the sharp selling in recent days.
Traders have a fairly light economic calendar today but will be looking towards UK Industrial Production at 0930GMT which is expected to improve by +0.8% on the month and by +0.6% for the year (previous -1.2%). Other than that, the EIA oil inventories at 1530GMT will be driving the oil price volatility. The crude oil stocks are expected to increase by +1.8m barrels after a -7.1m barrels drawdown last week, whilst the distillates are expected to also increase by +2.1m barrels and the gasoline stocks are expected to increase by +2.4m barrels.

Chart of the Day – USD/CAD

The pair is once more at a critical juncture. Since May 2016 the market has been building a series of higher key lows that have formed a strong uptrend, with the recent corrective move back from the late December high at 1.3600 back to 1.3175, which is once more at the primary uptrend. The past three sessions have had the market consolidating above 1.3175 support whilst also being supported at the uptrend and also once more at the rising 144 day moving average (today around 1.3190). The Stochastics are negatively configured but are beginning to show signs of bottoming with the RSI also ticking higher. A move above Monday’s high at 1.3275 would be an improvement and a close above would signal that the bulls were beginning to be more confident, something that would also be a close back above the 1.3250 old long term breakout which has been a key gauge of recent months. The hourly chart shows that momentum remains negatively configured near term, whilst an improvement on the hourly chart above 60 and consistently positive hourly MACD lines would be a signal that the bulls were gaining control and is something to watch for.

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Wednesday, 11 Jan, 2017 / 8:31

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