Risk Markets Higher Despite Higher US Dollar
Risk markets have been attempting to push on this week, despite the continued strength in the US Dollar. The benchmark global indices tracked here were mostly higher yesterday. US and Asian indices led the way with both the S&P and the Nikkei ended the day in the green. The DAX and the FTSE were a little more sticky, though both indices rallied firmly off the days lows to end the session just below their opening prices.
It's an interesting environment for stocks currently given the changing backdrop we are seeing. In the US, a fallback in CPI over July has seen traders scaling back their rate-hike projections across the remainder of the year, anticipating that July’s data might mark the inflationary peak. Nonetheless, the US Dollar has remained strong, fuelled by weakness in the world’s second largest economy. Chinese retail and industrial figure, posted yesterday for July, came in sharply lower and were accompanied by a fresh 0.10% MLF rate-cut from the PBoC. With fears over a broader slowdown growing in China, USD is seeing plenty of demand from shifting capital flows.
In the UK and Europe, stocks are less buoyant currently in the face of further expected tightening from the ECB and BOE. Additionally, fears over the continued fallout from the Russia-Ukraine war, higher energy prices, supply constraints and COVID and Brexit difficulties, mean that sentiment is looking a little cloudy near-term.
Technical Views
DAX
The rally off the 12462.59 lows has the potential to mark a large double bottom pattern, hinting at further upside in the longer-term. However, price is facing a big challenge here with the bearish trend line from YTD highs sitting just above market. With both MACD and RSI bullish, focus is on higher prices while 13672.31 remains as support with bulls eyeing 14170.79 next.
S&P 500
The rally off the 3613.50 lows has seen price breaking higher above the corrective bull channel. Price is currently testing a key area ta the 4305 level resistance and bear trend line from YTD highs. With both MACD and RSI bullish, the focus is on a breakout higher while 4153.50 holds as support.
FTSE
A little messier than the prior two indices, the FTSE continues to trade within a large ranging pattern. Price is sitting just under the bearish trend line marking the top of the structure, along with the 7558.7 and 7691.6 resistance levels. With bearish divergence in momentum studies, risks of a pull-back are growing, putting focus on support at the 7362.6 level.
NIKKEI
The rally in the Nikkei has seen the market breaking out above the March and June highs with the market now back up to its highest level since January and fast approaching a test of the 2022 highs. With both MACD and RSI bullish, the focus is on a further push higher near-term with 29464.9 the next resistance level to watch.
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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.