A better mood is soothing markets, but will it last? – North American Mid-Week Market Update

• Mid-Week review where we dive into the major developments for North American and global Markets
• Markets have begun to reprice the potential for an earlier than expected resolution to the Middle Eastern War, with US-Iran indirect talks reportedly picking up
• WTI and Brent eased significantly, helping inflation expectations to relax and propping up US Stocks

Log in to our mid-week North American Markets overview, where we examine current themes in North America and provide an overview of index and currency performance.

As we are now well into the fourth week of the US-Iran-Israel conflict, Market Participants are still looking to see whether we are in for a long ride.

At the commencement of the conflict, both the US and Israeli side announced operations spanning around 5 weeks, something that largely got priced out as the War continued and anxious headlines came by the thousand. We are slowly approaching the deadline.

The reality of the strategic advances is difficult to estimate, but what is certain is that ballistic missile and drone launches have greatly diminished since the start of the War, from 100 salvos at once to the current 1 or 2 per launch. Could it be enough to compromise the Islamic regime?

At least, WTI's correlations with other asset classes during the entire War have generated opportunities to find trades, even if some of the commodity's movements were nothing short of erratic.

Check out the almost perfect inverted correlation between WTI and the Dow Jones!

The bottom line remains the same. All that Markets want to know is:

Is this War going to drag on for long? Is the Strait of Hormuz going to be relieved? Is Oil heading back down?

This is the only thing that matters, and, in fact, the last question will dictate the rest of the Market flows, including US Dollar demand and everything that follows.

For now, a ceasefire to April 30 is still shy of 50% priced in.

As part of the whole War shenanigans, Investors are slowly turning back to PMI and other economic guidance to see whether rate hikes would actually be warranted or if the economy is facing a standstill amid current economic cycle peak estimates.

Data points are diverging across the board – Labor data has been on a roller coaster, with Jobless Claims consistently declining but Non-Farm payrolls correcting.

The past session also offered puzzling data for the US, as Manufacturing PMIs just came in with a decent beat (52.4 vs 51 exp) while the stickier Services PMIs are now backing off (51.1 vs 51.7 exp).

In Canada, traders are attempting to price hikes. Still, the latest inflation and growth data haven't yet corroborated that view – and BoC Governor Macklem didn't explicitly indicate anything of the sort.

So the general idea is not to overinterpret Market signals; keep looking for quick trades and fade price (sharp) extremes, as no one knows what to do with the current situation.

If the best and most knowledgeable are uncertain, the best thing is to assume you should be, too.

Let's dive right into our Mid-Week North American Markets recap.

Read More:

• The Metals space is as confused as traders are – Silver (XAG/USD) & Gold (XAU/USD) intraday outlook
• Global markets swing on US–Iran war headlines as risk-on rally falters – a cross analysis on S&P 500, US Dollar Index, AUD/USD, and WTI crude
• AUD/USD: The technical squeeze between 0.6980 and 0.7070

Global Indexes haven't been able to fully recover their recent drops, but still have made gigantic progress after the US-Iran talks picked up again.

Investors will want to see decisive progress before Trump's Friday deadline – Particularly as it will also coincide with the arrival of the 4,500 Marine fleet in the Middle East.

The Dollar Index has remained in its 99.00 to 100.00 elevated range despite the correction in WTI – This implies either catch up, short-dollar opportunity ahead, or the pricing of a new trend.

If US Data comes in hot around those levels, a break above 100.00 is not to be fully discounted!

Levels to place on your DXY charts:

Resistance Levels

• 99.40 to 99.50 Pivot/Resistance
• War Spike and 4H 50-period MA 99.68
• 100.00 to 100.50 Main resistance and Range highs
• 100.544 War highs

Support Levels

• 98.70 to 99.00 Support
• 98.00 Key Mid-Range Support
• Mid-range Pivot 97.40 to 97.60
• 2025 Lows Major support 96.50 to 97.00

The US Dollar remains on top of recent FX performance.

The Petrodollar is somehow largely reversing its losses against the Australian Dollar, but slightly dipping against the Euro and GBP which are on the way to price in hikes at coming meeting.

The Canadian Dollar is losing some of its relative strength as the Loonie correlates more sustainably to movements in Energy commodities – Only appreciating against the AUD which lost some steam.

USD/CAD is now forming a newfound upward channel which hints at a higher timeframe range between 1.3550 to 1.3850/1.39 (the precise high still has to be found).

In the event of any retracement, keep a close eye on the 4H 50-period MA (1.3724) as it should indicate relative strength within the range (if sellers or buyers are in control, below or above respectively)

Levels of interest for USD/CAD:

Resistance Levels

• 1.38 Pivotal Resistance +/- 100 pips (testing)
• 1.3850 mini-resistance
• 1.39 to 1.3925 Support turned resistance

Support Levels

• 4H 50-period MA 1.3724
• 1.3750 Momentum Pivot
• 1.3630 to 1.3660 Key Support
• 1.3550 Main 2025 Support (imminent rebound)
• October 2024 Support 1.3450 to 1.35

The North American Calendar is full of interesting events all the way to next Wednesday.

The most important event, not shown in the high-tier, but a game changer: the University of Michigan Inflation expectations releasing Friday at 10:00 A.M. ET.

For the rest, listen to what the Fed has to say in their flurry of speeches (except for Miran, still irrelevant to this point) and Economic releases to spot if the economy is indeed suffering from the war.

Canadian traders will pay close attention to next Tuesday's Canadian GDP data.

As always, keep a close eye on Middle East Developments.

Safe Trades!

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