Markets resist and volatility fades – North American Mid-Week Market Update

• Mid-Week review where we dive into the major developments for North American and global Markets
• North American Stock Markets sagged since last week but remain quite resilient
• The conflict in the Middle East continues, with the Strait of Hormuz creating its lot of anxiety

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.

We are now into the 12th day of the US-Iran-Israel conflict, and Markets have seen their fair share of volatility.

As explained in our past mid-week recap, Markets have remained surprisingly resilient despite a historic conflict. Traders logged in with a scary Oil price at the weekly open, gapping from $92 to $120 and taking risk sentiment to the abyss, but this entire move was short-lived.

About a few hours into the North American session on Monday, Oil fully erased its 30% move, which, not surprisingly, led to a swift rebound from Wall Street.

The price action is now more balanced than it was, but cracks are showing, with Crude prices remaining resilient in its newfound $80 to $90 range.

Rising again in today's afternoon session, US Equities have started to correct – Tracking Oil will be necessary for traders looking to grasp directional clues from the broader asset class.

A major contributor to volatility is the repeated threats to ships, locked at both sides of the Strait of Hormuz.

This morning saw the release of a bleak announcement, with three tankers being victim of drone attacks and adding to a spike in WTI, also, dragging daily sentiment.

Add to it further threats from Iran to drop mines at the bottom of the Strait, and Oil will not get many reasons to break lower – at least as long as the war continues.

The military operation appears to be advancing, but doubts are emerging about the exit plan. If the US and Israel can't get the desired regime change, the war could drag on further. It seems that the Iranian population will have to do what it takes to topple the dictatorial regime once Basij and IRGC forces are depleted.

In other Markets, Metals have remained in a sideways battle, dragged up and down by flows into and out of the Petrodollar, which itself correlates only to WTI prices.

Since its Globex Open peak, the Dollar has actually lost some ground, but only against the rebounding Australian Dollar, with the AUD bouncing to new 3-year highs – More details just below.

In terms of economic news, Markets largely disregarded the gigantic miss in Non-Farm Payrolls (-148K vs expectations!), which could really add to the anxiety if subsequent Labor reports confirm a new wave of weakening.

Also, this morning saw the release of yet another drop in US CPI, now at 2.4% year-over-year, which could help the case for future rate cuts. More clarity will be awaited with Friday's Core PCE release.

By the way, the Bureau of Labor Statistics recently reported difficulties compiling data due to recent staff readjustments – a hint of less accurate US Data ahead? This would explain, in part, the more confusing streaks in recent US major data.

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

Read More:

• Stock Markets drop despite low CPI report – Dow Jones and US Index Outlook
• Oil surges again to $86 as Iran attacks ships in Hormuz – Intraday Analysis
• US Dollar Index (DXY) rises as US inflation in line with forecasts

Outside of some drops in the Toronto Stock Index and Dow Jones, Global Equities have remained surprisingly resilient in the latest stretch.

Surprising considering the rise in Oil prices and global supply fears. Nasdaq is actually up 1% compared to last Wednesday, supported by a relative rebound in Tech – The higher-beta sector is getting priced to be less affected by the any rising costs in fuel.

The Dollar Index is remaining surprisingly resilient after its Friday double-top, with Bulls reappearing fiercely at the 4H 50-period Moving Average.

It seems that Dollar short-positioning covering is dominating, particularly as long as Oil remains higher. Check out our latest DXY analysis right here.

Levels to place on your DXY charts:

Resistance Levels

• 99.40 to 99.50 January Resistance
• War Spike 99.68
• 100.00 to 100.50 Main resistance and Range highs
• 100.376 November highs

Support Levels

• 98.70 to 99.00 Key Pivot
• 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 actually lost some ground against most FX Majors, as it remained particularly strong throughout the past week.

The Aussie and Canadian Dollars, two currencies well positioned to profit from higher commodity prices, have shown impressive rebounds against the Greenback.

The Canadian Dollar is on its honeymoon, consistently rebounding since the beginning of the conflict.

Don't forget to explore our latest in-depth coverage for the Loonie:

Discover: The Canadian Dollar loves conflict – Has the CAD reached a long-term bottom?

USD/CAD responded precisely to the top of its descending channel, imminently responding to the 1.3560 Main 2025 Support.

Any rebound here would look to test the 1.3630 Moving Average combo – selling off from there would point to new lows on the pair.

On the contrary, having rebounded in the mid-level of the bear channel, a break above the MAs could point to higher chances of a Channel break.

Levels of interest for USD/CAD:

Resistance Levels

• 1.3630 to 1.3660 Mid-Range Pivot
• 1.3750 Pivotal Resistance (Channel top)
• 1.3770 to 1.38 Key Resistance
• Major Resistance 1.3870 to 1.39 (January highs)

Support Levels

• 1.3550 Main 2025 Support (imminent rebound)
• October 2024 Support 1.3450 to 1.35
• 1.3480 USD-Crash lows

The North American Calendar is quite packed until next Wednesday.

Some highlights include Core PCE and U-of-Michigan Consumer Sentiment, with Canadian Employment on the Northern border.

Next week however will see the release of both the Bank of Canada and FOMC releases on Wednesday.

And don't forget the Canadian CPI on Monday.

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

Safe Trades!

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