EURUSD – What a week for the Euro! The European Central Bank (ECB) increased their stimulus program by 20 billion to 80 billion per month AND lowered commercial deposit interest rates from -0.3% to -0.40%. Normally an unexpected move like this by the ECB would have caused an negative impact to the currency, however, it caused the exact opposite and drove the Euro through the roof! This tells me that the Agents of the Fed are losing confidence in the ECB to actually stimulate the economy.
The ECB also expanded their scope to buy investment grade, non financial, euro denominated corporate debt. This puts the ECB on the hook if private companies default. I’ll expect the euro to at least drop to where the upward move started @ 1.09800.
USDCAD – This market continues to retrace back into equilibrium from being heavily overbought. The market is at an important level with a trend line, however, I don’t think it will hold and much prefer the 1.28300 level below. We’ll see what happens. Another point worth mentioning is the Oil’s price reached $40 a barrel. Despite the fact that oil inventories rose to another record level at 520 million barrels (not including the Strategic Petroleum Reserve of 700 million barrels). Which leads me to believe that there is some short term speculation about the price of oil. I don’t expect the price of oil to continue going up, especially when demand is low and supply is increasing. In other words, I think the temporary sell off in this market was long over due, however, it will probably turn around and start going back up as the price oil drops again shortly.
US 30 – The aggressive buying of the US stock market continued this week into the top resistance level mentioned in last week’s market update at 17200. I expect the market to stall here before the Agents of the Fed make a move to push the market. I still stand with a negative bias to the whole stock market. If history is any lesson, when the US stock market has a really bad start of the year, more often than not, stocks were in the negative at the end of the year. 2016 started off as one of the worst years in the history of the US stock market. Only time will tell what will happen.