Markets Price In The Future Fed Hikes, Canadian Job Numbers On The Table

Yesterday, the major European bourses ended their sessions in the red. The U.S. indices managed to end the trading session with minor gains, after experiencing some weakness in the beginning of the trading day. Europe will be relatively quiet on the economic data front, however, it will be Canada’s turn to release employment numbers for March.

THE EQUITY WORLD REMAINS MIXED

Yesterday, the major European bourses ended their sessions in the red. In Europe, markets continued to slide due to increased inflationary risks and that the ECB believes that the conditions for lifting rates were fulfilled, or are ready to be fulfilled, as mentioned in the ECB’s account of monetary policy meeting, which was delivered yesterday. The committee did mention in their last meeting that the asset purchase program could end sometime in Q3 of 2022, if the inflation outlook will not weaken. The rates would be raised only after the asset purchase program had ended.

The U.S. indices managed to end the trading session with minor gains, after experiencing some weakness in the beginning of the trading day. Investors were still digesting the FOMC meeting minutes, released on Wednesday, which added more fear into the market, as Fed favors more rapid rate hikes. That said, we believe that there might be room for some recovery before the next Fed meeting in the beginning of May, as market participants start to price in what is already known. Investors might also take advantage of the lower valuations of some stocks, which may help indices to bounce, at least in the near term.

DJIA — TECHNICAL OUTLOOK

Yesterday, the DJIA index reversed higher, ending the trading session in the green. Overall, the price continues to trade above a short-term tentative upside support line drawn from the low of March 8th. The move lower, which was seen in the first half of this week, could be considered as a temporary correction, before another possible drift higher.

In order to aim for higher areas, a break above yesterday’s high, at 34705, would be required. This way more bulls could run into the field, potentially helping the index to move towards the 35107 hurdle, marked by the high of April 5th. If the bulls remain strong, the next target might be at 35382, marked by the high of March 29th.

Alternatively, if the index breaks below the aforementioned upside line and then falls below the 33865 hurdle, marked by the low of March 17th, that may change the direction of the current short-term trend, potentially opening the door to the 33387 zone, marked by the low of march 16th, where a temporary hold-up might occur. That said, if the bears continue to advance, this could lead DJIA to the 33048 level, marked by an intraday swing high of March 15th.

CANADA’S TURN TO RELEASE JOB NUMBERS

Europe will be relatively quiet on the economic data front, however, it will be Canada’s turn to release employment numbers for March. The unemployment figure is expected to tick lower, going from 5.5% to 5.4%. Currently, there is no forecast available for the participation rate, but what we know is that it has been coming out around the same level, slightly above the 65% mark. The employment change figure is believed to have declined strongly, going from 336.6k to 80.0k. If the actual reading comes out even lower, this could have a negative effect on the Canadian dollar. That said, the effect might be temporary, as CAD may remain vulnerable to movements in oil prices.

USD/CAD — TECHNICAL OUTLOOK

After reversing higher on April 5th, USD/CAD grinded higher, but found resistance near the 200 EMA on our 4-hour chart. If the pair continues to balance above the rest of the EMAs, there is a possibility to see a further upmove, given that the U.S. dollar remains under buying interest and the price of oil is currently moving lower.

If, eventually, USD/CAD breaks above the current highest point of April, at 1.2611, this will confirm a forthcoming higher high and place the rate above the 200 EMA. More buyers could join in and drag the pair to the 1.2646 obstacle, or to the 1.2694 hurdle, marked by the inside swing low of March 11th. If the buying doesn’t stop there, the next potential target might be at 1.2738, which is an intraday swing high of March 16th.

Alternatively, if the rate drops below yesterday’s low, at 1.2538, this could also place the pair below all the EMAs, this way attracting more sellers into the game. USD/CAD may drift to the 1.2479 hurdle, a break of which might set the stage for a move to the current lowest point of April, at 1.2402.

AS FOR THE REST OF TODAY’S EVENTS

Some market participants will be keeping a close eye on the Russian inflation numbers, both MoM and YoY for March. The MoM reading is expected to almost double, going from +1.1% to +2.1%. The YoY one is forecasted to go from +9.2% to +16.9%. The explanation for such high numbers is clear, as the country is experiencing a shortage in supply of certain imported goods, due to sanctions from the West. Also, Russia will deliver its GDP growth rate for Q4, which is believed to have improved from +4.3% to +5.0%. If that’s the case, this may give the rubble a slight boost against its major counterparts, however, the currency will mostly remain vulnerable to the situation in Ukraine and to the progress in the negotiations between Russia and the EU on the method of payments for the Russian gas.

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