Stocks and crude oil surged for another week on a couple of factors. DJIA extended the rebound from February's low of 15503.01 and closed at 17006.77, up 366.8 points. S&P 500 also closed up 51.94 pts at 1999.99, comparing to February's low of 1810.01. Investors' sentiments were first lifted as China lowered the so called reserve requirement ratio for banks. Then, ECB rhetorics added to speculation of additional stimulus to be announced this week. Thirdly, a string of lackluster US economic data added to case for Fed to be on hold for the first half of the year at least. Stabilization in crude oil also helped support sentiments. while WTI also extended recent rally to close at 36.33. Gold rode on dollar's weakness and broke out of recent range to close at 1260.1. In the currency markets, Dollar was the weakest one on Fed expectations while Yen followed on risk appetite. Euro and Swiss Franc are the next weakest as markets await ECB meeting. Commodity currencies were the strongest, following stocks and oil.
Risk rally is set to continue this week leading to ECB meeting. Also, WTI crude oil's break of 35.64 fibonacci resistance affirmed the case of near term reversal and cleared out a major risk for stock markets. Current rise in DJIA is expected to extend in near term. Recent development suggests that price action from 18351.36 are merely a sideway consolidation pattern. It could be finished with three waves down at 15450.56. Or it could develop into a triangle pattern with one more falling leg. Thus, we'll start to be cautious on reversal near term trend line resistance at around 17800.
Dollar index's breach of 97.09 support argues that rebound from 95.23 is completed at 98.58 already. The index could head for a test on 95.23 support first. And the choppy fall from 100.51 would extend on break of 95.23, towards 92.61. Overall, the index is bounded in a medium term consolidation pattern since hitting 100.39 last March. More range trading would be seen.
Regarding trading strategies, our sell AUD/USD on break of 0.7068 minor support was not filled as there was no return in risk aversion. We're expecting further rise in stocks and oil in near term. Meanwhile, dollar index looks reversing. Logically, we'd prefer to buy commodity currencies against dollar. And, among them, AUD/CAD and AUD/NZD are basically stuck in range, making them neutral to each other. However, we'd like to point out that daily RSI in AUD/USD is entering into over bought region. Similar, daily RSI in USD/CAD is also entering into oversold region. A brief pull back in commodity currencies could be due. Hence, we'd prefer to buy AUD/USD on dip to 0.73. And sell USD/CAD on recovery to 1.36.