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Stocks Trade within a Minor Triangle, The Dollar Climbs Higher
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Investors fastened their seatbelts yesterday and went for the ride, as the major U.S indices presented another volatile session. Jobless claims and ongoing concerns from Greece had an effect on the trading day, causing volatility across the board. Even though the indices plunged at the start of the session, participants used the downbeat start to grab stocks at low levels and drive the indices to higher ground.
Jobless claims had a negative effect on the session as the Labor Department said that weekly jobless claims unexpectedly surged last week by 22,000 to 496,000, the highest level in over three months. Economists were expecting initial claims to drop by 460,000. The four week barometer, which is known to be a more reliable measurement, jumped to 473,750
Greece continued to grab investor’s attention as Standard & Poor’s warned that Greece could experience a downgrade, due to their ongoing problems and high deficit. Further problems in the economy could force Greece’s government to provide further support, to help stabilize the economic situation. This will have a direct affect on the country’s high debt as they will be forced to engage in unconventional borrowing methods, using the help of other developed countries.
After crashing at the start of the session, the S&P500 soared higher and presented an interesting hammer like candlestick. Even though this type of candle is often known as a reversal candle, confirmation is still required. One can see on the chart below that the S&P500 is now stuck between minor trend line support and resistance. A break of the lower level could lead this chart to March’s low. A break to the upside will force the index to deal with major resistance at 1115 points.
Over in Asia, stocks opened on a positive note, despite the volatile session from the U.S. The Nikkei opened with minor gains, while the BSE Sensex and the Nifty 50 both jumped higher. Korean manufacturing confidence and Japanese industrial production increased and India’s Finance minister forecast the country’s economy could grow by a whopping 10%, according to Bloomberg news.
A Mixed Session on the Currency MarketThe Dollar index also played with investors, soaring at the start of the session, only to come back into range. To date the index is trading within a minor range around 80.5 points. Divergence is still pointing towards a correction, but the index could only present further consolidation, rather than a textbook pullback.
On individual pairs, the USD/JPY and the GBP/USD both dropped as economic concerns spooked Forex investors. The EUR/USD also presented minor weakness but managed to hold its ground compared to other currency pairs as investors preferred the Euro.
The Euro is still favored despite ongoing problems in individual countries. For example Spain is dealing with one of its hardest recession, characterized by high unemployment, falling house prices and economic contraction. The GBP/USD also presented an interesting session after investors realized that the BOE could engage in further monetary easing. From a technical point of view the GBP/USD broken double support. A confirmation candle is required to prevent a false break.
Economic data to watch Out ForThe U.S will grab the center of attention today, scheduled to release its second release of U.S fourth quarter GDP. The number is expected to come out at 5.6% vs. a prior 5.7%. In addition the U.S will release its Chicago PMI, consumer Sentiment index and Existing Home Sales.
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