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Stock Markets towards new all-time highs? US Fed ready to cut interest rates for the first time in more than 10 years;

by John Knobel

Market Drivers

 

  • European stock markets set to follow US stock markets higher; the major European stock indices either at, near or have already broke above key resistance levels; technical momentum trading strategies may start to kick in a drive European indices to test new all time highs on the back of lower US and European interest rate prospects;

 

  • Major Stock Indices are either at, near or have  already smashed above key resistance areas after the US Fed removes the word “Patience” from its FOMC Statement; indicating it's ready to cut interest rates for the first time in more than 10 years; stock markets favour low interest rates since it lowers the cost of borrowing thereby increasing corporate profit potential;

 

  • Dow Jones 30 breaks above the 26,533 resistance level; current price 26,650; all time historic high 26,951.81;  potential now open for an attempt at hitting a new all-time historic highs near 27,178 to 28,227 as investors jump into stock markets on hopes that lower US interest rates will support higher stock markets;

 

  • Gold and Silver break-out towards the upside as lower interest rate prospects makes precious metals an attractive place to store wealth; gold and silver current prices remain with bullish momentum on the daily chart;

 

  • Crude Oil speculators boost Oil prices higher with WTI (CL) jumping +4.4% higher over the last 5 days, although Crude Oil (CL) prices still have fallen over -12% over the last 30 days;  higher Oil  prices finding short term support on expectations that lower US and EU interest rates will help boost global demand for Crude; CL current price $55.33 support $50.20; resistance $55.85;

 

Charts

 

GBP/USD +75 pips after the Federal Reserve signalled it could cut U.S. interest rates as early as July, traders now looking ahead to a Bank of England (BOE) interest rate decision today; forecast to remain unchanged at 0.75%;  the BOE is more bullish on higher rates than its European and U.S. counterparts which could lead to a stronger GBP; current price 1.2699; a break above the 1.2737 resistance leaves open the potential for a sharp move higher towards the key pivot 1.3085 level; otherwise a break below the 1.2573 will open up the prospect of a retest of the 1.2441 lows; technical momentum indicator RSI buy signal observed on the daily chart, price needs to clear above the 1.2737 for further upside confirmation.

 

Technical Alert: Eurostoxx 50 Index breaks above resistance after European Central Bank (ECB) adds fuel to European stock markets saying the ECB willing to use its “tools” to stimulate the European economies;  current price 3477; upside 3519 to 3633, provided 3407.5 can hold as new support; otherwise a test of the lower support 3260;

 

Silver price +6% last 30 days on expectations that the US Federal reserve move make a move to lower US interest rates thereby adding downside pressure on the US Dollar while making precious metals prices more attractive to non-USD investors; current price $15.35; upside $15.64 to $16.67 and $16.95 further out; downside near $14.70 support. Upside momentum remains intact since RSI is above its signal line (Bullish), current price is above its 4,9 and 18 period moving averages (bullish); current price has broken towards the upside of the multi-month previous downward trendline (Bullish)

 

Source: FXGM / Bloomberg