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Good economic data and a stronger dollar pushes S&P500 to all-time highs again

The US stock markets are riding higher again with the FOMC meeting just around the corner and the expectations of a change in monetary policy. The data today out of Europe reversed the single currency’s price action from yesterday and then the US dollar pushed even higher with better-than-expected US data.

Market Wrap

The US dollar index bounced off the rising trend line on the back of the euro and German data from this morning but really accelerated higher from the US Open. US Chicago PMI data smashed expectations picking up after two consecutive months of decline.

US Chicago PMI data for October came in at 68.4 and beat the market expectations of 63.5. Employment within the PMI data was up as the new orders. Production was the only component not to rise. While The University of Michigan sentiment indicator final reading for October was also higher than expected.

The Fed's preferred measure of inflation came in weaker than expected for the annualized metric. US core PCE month-on-month for September came in as expected at 0.2%, with Year-over-year unchanged from the previous reading of 3.6%. The TLT long bond ETF rose as benchmark yields dropped -1.0% and the 10y2y yield curve flattened further by dropping another 2%.



The S&P500 has continued to push on higher having now clearly rejected the old previous swing high which is acting as a level of support. All the major tech stocks bar Apple Inc. are higher today and Microsoft has surpassed Apple to become the most valuable company once again in the world by market cap. Tesla share prices again rose today, printing $1100 per share.

While price action remains under the 1.2430 level, I am sticking with the bearish consensus for the USDCAD. The dollar obviously caught a bid today, but Oil and the Bank of Canada in my view will give the Canadian dollar the edge over the US dollar and I see this deeper retracement as a better selling opportunity. The risk is lower for those that would put their stop above the recent swing high and the profit target just got further away from the entry. Increasing the risk: reward ratio.

On the H4 chart, oil on the Brent contract has traded back inside the old range and a close above the $83.30 level today should give the bulls enough impetus to keep buying next week. The only downward pressure I can see is if traders continue to buy the greenback ahead of the FOMC.

Canadian GDP came in under expectations but beat the previous reading of -0.1% coming in at 0.4% for August

I had previously identified the trend line break as a possible level to look for a short trade from, though I assumed they would use the big figure of 1.17000 to create a liquidity event. The EURUSD didn’t even get above yesterday’s high before collapsing below last week’s lows. Yesterday I wrote that I thought the run-up in the EURUSD after the ECB meeting was a red herring as the ECB had done nothing that I could see to promote a stronger euro currency.

The ActivTrades sentiment indicator is still showing most traders on the platform are bullish, so until these traders get stopped out or flip their position, we could be in for lower prices in the EURUSD.

Euro inflation data came in better than expected as did the euro area Flash GDP data. EU GDP Flash preliminary data QoQ for Q3 was 2.2%, though German Flash GDP this morning came in worse than expected at 1.8%. The eurozone inflation data was the start of the morning's sell-off in euro crosses.

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