Equities Lower on Risk Aversion and Firmer USD
Global equities benchmarks are seeing a more offered today across early European action on Tuesday. The resurgence in the US Dollar has prompted a squaring of late long positions. While the recent tone remains constructive, all eyes now are on how the Dollar moves across the rest of the week as we approach the NFP release on Friday. The catalyst behind the uptick in USD was Fed’s Waller (voting FOMC member) who commented yesterday saying that he sees room for rates to continue rising across the year, with scope for rates to rise above neutral if deemed necessary. These comments stand in the face of the growing market view that the Fed will look to pause after the July hike and suggest that perhaps such a perspective is a little premature.
Along with the rally in USD, news that the EU has agreed a partial ban on Russian oil is also having a dampening effect on risk assets today. Such a move will undoubtedly open the way for greater inflation and growth issues in the near-term. Additionally, the risk of Russian retaliation is also fuelling some uncertainty today.
On the data front, today’s flash eurozone CPI will be closely watched. If inflation is seen rising to 7.8%, as expected, this will no doubt put further pressure on the ECB to act, with some now suggesting room for a larger .5% hike in May. Such expectations should act as a headwind for European asset prices.
Technical Views
DAX
The rally in the DAX above the bear channel has seen price breaking above the 14170.79 level. While above here, and with both MACD and RSI bullish, the focus is on a test of the 14791.27 level next.
S&P 500
The rally in the S&P has seen the market breaking above the local bear channel which has framed the recent decline, as well as the 4062.25 level. For now, however, price is stalling into a test of the 4153.50 resistance. Should we fail here, focus will return to further downside near-term. However, with both MACD and RSI bullish, there is room for a further push towards 4305 while 4062.25 holds as support.
FTSE
The rally in the FTSE off the 7241 level has seen the market advancing to end the month at fresh highs. Price has now broken above the 7558.7 level and with both MACD and RSI bullish the focus is on a test of the 7691.6 level next and the bull channel top above. To the downside, 7362.6 is the key support to note.
NIKKEI
The NIKKEI is testing a key resistance area here. Price is currently stalling at the 27422.9 level and falling wedge top. With both MACD and RSI bullish, the focus is on an eventual break higher and a move towards 28356.6 if bulls can breach the current level. To the downside 26932.1 and 26246 are the key supports to note.
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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.