March 07, 2019Market review and metrics for Forex, Oil, S&P500 & Yields.

Pivot points, Support, Resistance & Fibonacci Reversal levels; Chart of Interest – <EURUSD>. {updated 5PM EST }

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  • Market performance (DAILY)

    Market Performance (click to enlarge)

Market Comments
Forex At times conventional market wisdom can be spot on, although it did have the benefit of quasi-official guidance. Draghi did not disappoint market prognosticators who had forecast a dovish ECB going forward. Acceding to the economic malaise sweeping the civilized world, the Governing Council (1) left rates unchanged, (2) resumed the practice of cheap funding to stimulate banks lending activities (TLTROs) and (3) announced that “key ECB interest rates to remain at their present levels at least through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.”, essentially admitting that the Euro zone is at or very close to a recession.

Even though the totality of a dovish statement was priced in, albeit at different levels (no change – almost 100%; LTROs – over 60%; no rate hikes through 2019 – less than 50%), the Euro fell across the board mainly on the promise of no rate hikes for 2019 which, again, raises the spectre of rate cuts. By the time the trading day had ended the common currency was sharply lower against all of its major brethren.

S&P500 S&P500 fell by about 0.8% as it breached last week’s low to settle at 2749. The catalyst for what is being termed as profit-taking was the European Central Banks’ pessimistic assessment of global growth prospects. This appears to be more anecdotal evidence that US equities may have been overly optimistic in pricing in a growth outlook that is not being borne out by the release of underwhelming earnings estimates. The bar for a “great trade deal” with China is getting higher by the day.
Oil & Yields
Crude oil ended the day higher as “OPEC+”, which refers to OPEC and other countries, notably Russia, remain steadfast in their resolve to control prices by reducing supply (cut 1.2 million barrels per day).

Bunds and T-Note yields fell as investors bought bonds in a move that seems to have a whiff of flight to safety characteristics.

  • Chart of Interest – EURUSD (Daily)
    A dovish ECB sent the common currency lower by more than 1% -vs- the US Dollar. Their somber projections for Euro zone growth saw major support at 1.1215 breached as the pair plumbed depths not seen since June 2017. The pair had been consolidating in a fairly tight ~350 pip range (1.1215 to 1.1570) since last November with Euro bulls clinging to the belief that the next move by the ECB would be to hike rates. This was dashed today. Price action has reached the lower bound of the descending parallel channel. One would normally expect a rebound but sentiment has soured to such a point where any move higher will surely be met with eager sellers. A break below 1.1180, which appears imminent, would bring support level at 1.1120 into focus. Minor resistance can be found at 1.1215 (previous support) with a move back above 1.1315 needed to give bears a pause.

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  • Pivot Points & Fibonacci Retracement Levels
    A technical analysis indicator used to try and determine the short-term trend of the market. The pivot point is the average of the high, low and closing prices from the previous trading period. If the market on the following period trades above the pivot point it is thought to be exhibiting bullish sentiment, whereas trading below the pivot point is seen as bearish. The Fibonacci retracement is the potential reversal of a financial instrument’s original move in price.

    Market Metrics (click to enlarge)