US Corporate Earnings and Macro Data to Guide Sentiment; S&P 500 Remains Caught in Uptrend Channel

The Euro gave up some of yesterday’s gains overnight as the market waits for the Greek government to reach its loss percentage agreement with private holders of the country’s treasury bonds and the results of today’s debt auctions in France and Spain.  Today we will also see some significant macro data out of the US, so traders are taking some positions off the table ahead of these event risks.  These US macro release will be the monthly Consumer Price Index (CPI), along with Initial Jobless Claims, Housing Starts and Building Permits, and the Philadelphia Fed Manufacturing survey.

The EUR/USD is now trading at $1.2850 and still hasn’t managed to climb back above the psychological 1.30 level.  Also adding to the risk-off mood was the jobs report out of Australia, which showed a very negative print for the month of December (dropping by more than 29,000), against expectations for a rise of 10,000 new jobs.  The unemployment rate, however, managed to remain relatively stable at 5.2 percent.

Equity markets during the Asian session closed in positive territory after news that the International Monetary Fund (IMF) plans to increase loan funding to troubled banks in the Eurozone.  Other causes for optimism came from speculative reports that the Chinese government plans to reduce capital requirements for Chinese banks, which would stimulate lending and increase manufacturing output.

As expected, corporate earnings have come to the forefront and taken some of the attention off of the Eurozone debt crisis (which is creating less in the way of meaningful new headlines) and this will continue today as market attention shifts to profit reports from Microsoft, Google, International Business Machines (IBM), American Express, Bank of America, Advanced Micro Devices (AMD) and Morgan Stanley.

Earnings from yesterday were generally positive, with Goldman Sachs once again the stand-out performer, and posting gains of 6.8 percent in the New York session.  Similar results were seen from eBay, which rallied 2.4 percent after fourth quarter earnings beat the consensus estimates as well.  These prints helped push the S&P 500 to a close 1.1 percent higher for the day (and this was also helped by the IMF story mentioned above).  The US financial sector in particular has produced some of the most positive numbers for its end of year profits and this welcome surprise is bringing long term investors back into buy positions and this year’s cheaper levels.

Technical Analysis:

The AUD/USD is pressuring some significant technical resistance levels as price is currently meeting the upper end of its longer term symmetrical triangle, which coincides with the 61.8% retracement of the decline from last July.  A close above the Fibonacci resistance will confirm the break and turn the longer term view back to positive.  A break of support at 1.0270 reverses the bullish bias.

The S&P 500 continues to press higher within an upward parallel price channel and when we look at the hourly charts we can see some strong support levels that should contain prices to the downside before seeing another push higher.  Fibonacci support matches nicely with historical and trendline levels, so traders can enter into long positions in the 1290 region, with stops below 1282, targeting new highs above 1305.

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