Equities Supported Heading into FOMC

It’s been a mostly positive start to the week for global equities benchmarks with most indices continuing to grind higher into month end. The decline in the Dollar over April has been a key factor in the continuing demand seen across the equities space. With this in mind, the upcoming April FOMC meeting this week is likely to set the tone heading into May.

While the Fed is not expected to adjust policy at Wednesday’s meeting, there are upside risks in terms of the outlook. Last time around, the Fed noted that the US economy was continuing to recover well, driven by vaccine progress and re-opening optimism. While the Fed noted that any spike in inflation over the coming months would likely be temporary it did acknowledge some two-way uncertainty in the outlook.

With US data continuing to print strongly and with the boost created by Biden’s $1.9 trillion fiscal package, the Fed could well strike a more optimistic tone this time which could fuel better USD buying, creating headwinds for equities. Alternatively, should the Fed downplay these upside risks and stick to its message of keeping easing in place for the foreseeable future, this should allow equities to keep trading higher in the near term.

Technical Views

DAX

The sell off from last week’s highs saw price trading back below the 15311.01 level to retest the broken bull-channel top. For now, the retest of the channel has acted as supported and while above the channel top, focus is on a further push higher. Should price slip from here, however, 14783.12 is the next support zone to watch.

S&P500

For now, the S&P remains tightly congested beneath the 4180.50 level resistance and the rising wedge top. Momentum studies have remained supported on this last drive higher, suggesting low reversal risks. Should we correct, however, the next support zone to note is back at the 3964.25 level with the rising wedge low in this area also.

FTSE

The breakout above the contracting triangle has seen price trading as high as the 7025.8 level before selling pressure kicked in to cap the rally. For now, price is still holding above the 6803.1 support level and the initial 2021 highs recorded in January, keeping the focus on further upside. The next upside objective for bulls will be the 7235.9 level.

NIKKEI

The breakdown in the Nikkei below the contracting triangle pattern saw price bouncing off the 28372.5 support. Price is now trading back above the 29005.6 level though is being capped by the retest of the broken triangle pattern. For now, with price still holding within the longer-term bull-channel, the focus is on further upside

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