Morning Trading Notes Jan 29: Stocks pause, grains rally with NAFTA and FOMC in focus

January 29, 2018, 6:30 am EDT

The Dow and S&P 500 started overnight trading rallying to new all-time highs but have dropped back slightly into the morning to digest recent gains. We saw similar action in Hong Kong overnight where the Hang Seng touched a new high then finished the day down 1.4%. European indices like the Dax and CAC are trading down moderately this morning. The FTSE is the only major index in the green, taking advantage of a soft Pound.

Meanwhile, in currency markets, the US Dollar appears to be stabilizing at a lower level with last week’s contradictory comments at Davos from US Treasury Secretary Mnuchin and President Trump having been fully digested. The Dollar Index still needs to regain 90, however, in order to call off its downtrend. With the exception of soft Sterling, other major currency pairs and gold are holding steady. Cryptocurrencies are under pressure again with Bitcoin and Ethereum falling 4% so far.

Commodities have been active to start the week. Grains have picked up where they left off Friday with gains accelerating for Wheat, Corn and Soybeans. Crude oil has paused with Brent slipping back under $70.00 but WTI holding $65.00 for now. Natural Gas is down 2.5% following an unusually warm weekend in consuming regions.

It’s a light day for economic and corporate news. The only major earnings report due is from Lockheed Martin. Of the limited economic news, the US Core PCE inflation report (an uptick to 1.9% is expected by the street) may attract the most attention as it is the main inflation measure that the Fed uses. Although nothing is expected out of Janet Yellen’s last Fed meeting on Wednesday, traders may focus on whether inflation pressures are increasing or decreasing and what that could mean for monetary policy under incoming Fed Chair Powell.

CAD and MXN have been steady so far but could be active through the day with the latest round of NAFTA negotiations in Montreal scheduled to wrap up today. Sentiment toward NAFTA talks has improved dramatically from a week ago when people were worried about the US walking away from the table and starting a trade war. Over the weekend, US Congressional leaders visited for an update and indicated that they want to see a deal reached. There also was talk about extending deadlines and adding more rounds of talks in order to continue working toward a deal. Continued signs of progress could help to support both the Loonie and the Peso.

 

This article is intended as general market commentary, based on sources considered to be reliable but could contain unintended errors. Commentary, estimates and charts are provided for information, education and entertainment purposes. They are not intended as and should not be construed in any way as investment advice. The authors assume neither liability nor credit for returns from readers’ trading or investment activity. We do not accept any remuneration from companies mentioned in this report. The authors or related parties may enter or exit short term trading positions in markets mentioned in this report at any time without notice. Some of the charts used in this commentary are based on Forex and Contracts for Difference (CFD) markets; leveraged products which carry a higher degree of risk and may not be suitable for all investors. CFD trading is not available in the United States of America. Copyright 2018 The Fundamental Technician, all rights reserved.

 

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