U.S. stocks started the week on a positive note as all three major indexes closed higher on Monday ahead of a busy economic calendar for the stock market.
Many big companies are expected to report their financial results which can lead to an increase in liquidity and trading volumes. Looking at yesterday’s price action, the Dow registered its sixth daily positive advance and closed at its highest levels for this year. In the meantime, both the S&P500 and the Nasdaq composite rose 0.39% and 0.93% respectively reinforcing the current bullish momentum of the stock market. Tesla shares climbed 3.2% while Apple stocks advanced 1.7%, however, Q2 earnings are expected to be lower than the previous ones according to FactSet which shows that analysts’ forecasts are pointing to a decline of more than 7% in the S&P500 earnings. Moreover, the focus will be on the upcoming FED rate decision scheduled for next week. The probability of a 25bps rate hike remains at 97%, meanwhile, investors will be looking for FED’s chair Powell’s comments during the press conference to get more guidance about the future monetary policy.
In the FX market, the U.S Dollar was little changed against a basket of major currencies on Monday after a quiet trading session that lacked important economic releases.
As of today, we will likely see an increase in trading activity as traders await the release of the monthly change in retail sales from the U.S., figures are expected to rise from 0.3% to 0.5%.
In the meantime, inflation is set to decline in Canada as the latest CPI reading is due to decline from 0.4% to 0.3%. From a technical standpoint, the USDCAD pair is likely to remain under pressure if prices continue to trade below last week’s high at 1.3305. A continuation lower can target the daily support of 1.3100 while a breakdown below it is expected to trigger another wave of decline towards the 1.3000 psychological support followed by the 1.2950 level in extension.
In the commodity market, gold is expected to stabilize in the coming hours between the 1963 resistance and 1945 support levels. In the near term, the yellow metal momentum is still positive, however, we will be waiting for a clear break outside of the zone mentioned above before confirming the next directional move. From a wider angle, a continuation higher should lead to a retest of the 1975-1983 weekly resistance zone, on the flip side, a close below the 1945 support is likely to expose the 1935-1925 support area in the coming hours.
Conversely, WTI started to show some signs of weakness in the near term after reaching a key resistance zone located between 76.90 and 78.00 levels.
Therefore, we might see a potential downside correction in the coming hours, however, the bullish momentum remains in place, and we expect oil to find strong support from the 73.25-72.60 zone when reached. On the flip side, a successful rebound can lead to a retest of the 76.00 area in the coming days.
Economic Analyst
Amine Hiani