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S&P 500 forms head and shoulder, dollar index rallies

By Margaret yang, CMC Market

FX – The dollar index surged to a 6-month high at the 94.56 area and continued to strengthen in Asian hours this morning. Last Friday’s US retail sales data and consumer sentiment beat market expectation. USD/JPY remained around 108.80. Immediate support and resistance levels for USD/JPY are at 107.00 and 110.00 respectively. USD/SGD is traded at around 1.3720 this morning, staying at a two-month high. EUR/USD retraced to the 1.1300 area as a result of the strengthening dollar.  GBP/USD slipped to the 1.4350 area, reaching a 3-week low.

Commodities – The crude oil price was little changed last Friday. Oil rallied 4% last week to a 6-month high, mainly due to a favourable US DoE oil inventory report and the Nigerian oil production disruption. WTI crude oil is trading at $46.90 this morning, up from $46.35 last Friday. Oil prices have surged over 70% since late January this year. Traders should remain cautious on possible profit taking activities as the price is hitting 6-months high, and continue to keep an eye on any oil production related news. A stronger dollar will put pressure on commodities, especially gold and oil.

The price of gold is little changed at $1,273 this morning. The near-term resistance remains at $1,286, which is also the 61.8% Fibonacci level. A key support level can be found near to its 50-SMA, which is currently pointing toward the $1,250 area. Silver is trading around $17.06 this morning. The near-term support and resistance levels are $16.75 and $17.66 respectively.

Equities – Asian markets have experienced significant selling pressure in early May. The Hang Seng Index has dropped more than 5% since end Apr. Singapore market has lost 8% since its April high. Disappointing earnings and lower than expected HK GDP data are probably the fundamental reasons behind the sell down.

The US market closed down 1% on Friday, despite better-than-expected retail sales and consumer sentiment surveys. The S&P 500 Index has formed a likely head-and-shoulder pattern, which is usually a bearish signal.

US SPX 500 - Cash

market_16052016

Key technical levels to watch:

  • Head and shoulder pattern
  • Immediate support levels: 2,036
  • Immediate resistance level: 2,082, followed by 2,132

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.