USD Rally Prompts Equities Sell-Off
It’s been a heavy start to the week for global equities benchmarks, with the four indices tracked here each being well-sold yesterday. We’re a little bit of stability in places today, though the overall tone remains heavy. The main factor weighing on risk assets this week is the resurgent strength in the US Dollar. On the back of some better data last week, a hawkish set of FOMC minutes and some hawkish commentary from Fed members late in the week, USD bulls have lit a fire under the market.
With traders moving away from the idea of a Fed-pivot and re-focusing their expectations on continued tightening, stock markets have come back under pressure. Additionally, away from the US, inflation in the eurozone and UK is now expected to stay higher for longer, according to forecasts made by some investment banks this week. With this in mind, central bank tightening expectations look likely to continue to keep equities prices anchored lower near-term.
Looking ahead today, the main focus for equities traders will be the release of the latest set of PMI readings from the US, UK and Eurozone. These readings will give a fresh glimpse into the recent economic performance in these economies and might well drive equities prices further lower if weakness is seen.
Technical Views
DAX
The latest test of the longer-term bear trend line has seen the DAX reversing below the rising trend line from YTD lows. Price is stalling just ahead of support at the 13067.45 level though, with both MACD and RSI turned lower the market is vulnerable to a break below unless bulls can get back above 13672.31 near-term.
S&P 500
The latest test of the bear trend line and 4305 level has seen the S&P strongly rejected. Price is now retesting the broken bull channel and support at the 4153.50 level and is holding for now. With momentum studies turned lower however, focus is on a break lower towards the 3910 level next if we don’t hold here.
FTSE
Following the laboured grind up to the 7558.7 level, the FTSE has since stalled and is correcting slightly lower. However, the move remain shallow for now and price action looks skewed towards another push higher unless we see the market back below the 7362.6 level near-term. To the topside, a break above 7558.7 will open the way for a test of 7691.6 above.
NIKKEI
The breakout above the 28356.6 level has seen the initial move stall with price now coming back to retest the level. While this area holds as support, the focus is on a continuation higher towards the 29564.9 level next. To the downside, should we slip below, 27422.9 is the next support to note.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.