Looking to the Futures
Market Reactions to U.S.-Iran Ceasefire and Fed Developments
Futures point higher overnight after President Donald Trump announced Tuesday, the U.S. ceasefire in Iran will be extended indefinitely, citing, a “seriously fractured” leadership structure in Tehran. On the domestic front, Kevin Warsh, President Trump’s nominee to lead the Federal Reserve was questioned at a Senate Banking, Housing, and Urban Affairs Committee confirmation hearing on Tuesday. E-mini-S&P 500 Futures for June (/ESM26) were higher 0.76% to 7454.00 (as of 8:15 AM ET). The yield on the 10-year U.S. Treasury Notes fell 0.61% to 4.266% and the Dollar Index was up 0.04% to 98.435.
The U.S. will continue its blockade of Iran’s ports, which will leave uncertainty in products that travel through the Straight of Hormuz. Overnight reports of Iran’s Revolutionary Guard Navy said, it had seized two container ships. Claiming maritime violations, according to the state media. Brent Crude Oil Futures for June (/BZM26) traded just below 100, at 99.78, up 1.00% on the news. Light Sweet Crude Oil Futures (/CLM26) for June were higher 1.44% to 90.96. The United Kingdom Maritime Trade Operations reported being fired upon about eight nautical miles off the coast of Iran. The UKMTO said a container ship was approached by an Islamic Revolutionary Guard Corps (IRGC) gunboat. The IRGC ship was said to have fired upon the ship, causing “heavy damage” to the bridge. All crew were reported safe.
The extended ceasefire provides some short-term resistance to energy, but supply disruptions remain unresolved and may leave the door open for rise in inflation. Investors will monitor updates from the Federal Reserve, inflation readings, and todays Weekly Petroleum Status Report from the U.S. Energy Information Administration (EIA) for queues as to the duration and impact the war has had on inflation and future interest rate decisions. The nominee to replace current Fed Chairman Jerome Powell was on the hill Tuesday for a Senate Banking, Housing, and Urban Affairs Committee confirmation hearing. Kevin Warsh, since the replacement process began, has faced questions about whether Warsh or any other Trump pick would be able to withstand the repeated pressure from the president and other White House officials to lower interest rates. The next Federal Open Market Committee meeting is April 28th and April 29th. The CME FedWatch tool, currently shows very little chance of a rate cut, with probability at 99.5% chance that rates will remain unchanged.
Technicals
E-mini S&P 500 Futures for June (/ESM26), shows a V-shaped recovery from the March 31 year-to-date low of 6353.25 and has found resistance and consolidated around the year-to-date high of 7185.75. The 20-day Simple Moving Average (SMA, yellow dotted line) and the 21-day Exponential moving average (EMA, green line) are slightly below the 100-day simple moving average (SMA, purple triangles). The 21-day EMA has breached above the 50-day SMA (orange line) with the 20-day SMA resting just above the 50-day SMA. This setup shows a strengthening trend, nearing a resistance level as the indices has started to consolidate into a possible bull flag pattern. The relative strength index (RSI) also supports that the future may be facing some resistance in the short-term considering the relative strength index is close to the 70 overbought level at 69.1749.
20-Day SMA: 6812.45
21-Day EMA: 6907.38
50-Day SMA: 6809.33
100-Day SMA: 6865.38
200-Day SMA: 6727.69
14-Day RSI: 69.1749
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