Equities Rebound As Dollar Tanks On Softer Fed Commentary
Benchmark global equities indices are starting February on the front foot with risk assets rebounding firmly this week following the heavy sell off seen over the prior fortnight. Equities appear to have taken some solace in the dialling back of hawkish Fed commentary following comments from Fed’s Bostic over the weekend. Bostic initially said that the Fed might be forced to tighten rates by as much as 0.5% instead of the expected 0.25% in a bid to address inflation. However, Bostic has since walked back on those comments saying such a move wouldn’t be his preferred option, and outlined his support for just three rate hikes this year. Fed’s George and Daly were also head voice their support for slow and gradual hikes. With this in mind, USD has corrected lower this week, allowing equities markets room to rebound.
Risk assets have also been supported by comments from Russia, pushing back against the idea of an imminent invasion of Ukraine. Russia has accused NATO and the western media of trying to spark a war and criticised reports outlining Russian invasion plans. While the situation remains very tense, markets for now at least appear to be taking some comfort in this dialling back of tensions.
Looking ahead this week the focus will be on the US labour reports due on Friday. A solid set of figures on Friday will easily rejuvenate demand for USD putting equities markets back under pressure. However, given the current dynamic, should we see any undershooting of forecasts, this would no doubt drive USD lower, giving equities further room to run higher.
Technical Views
DAX
The rebound in the DAX off the 15078.83 lows has seen the market breaking back above the broken bullish trend line and above the 15473.83 level support. While above here, and with MACD and RSI turning quickly higher, the focus is on a continuation. However, 15743.01 remains a big obstacle which bulls needs to overcome quickly.
S&P 500
The rebound off the 4295.75 lows has seen price breaking back above the 4475.25 level. While demand is looking good for now, the breakdown through the rising trend line was heavy and until price reclaims the broken trend line, there are risks of a further move to the downside, potentially effecting a shift in trend.
FTSE
The FTSE continues to hold in a tight block of price action just below the 7558.7 level and bull channel top. Following the rebound off the 7241 lows, both MACD and RSI are turning higher, suggesting focus remains on further upside for now with 7691.6 the next level to note.
NIKKEI
The rally off the 26246 lows has seen price trading back up to retest the underside of the broken contracting triangle pattern. This region, marked by 27422.9 resistance, is holding for now, meaning further downside cannot be ruled out. However, a break higher here would be firmly bullish, confirming a false downside break of the triangle, and putting the focus on 28356.6 next.
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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.