Risk Aversion Deepening On Inflation Fears
Benchmark global equities indices have started the week under pressure with selling seen across Monday and over the European open on Tuesday. The resurgence in the US Dollar along with broader risk-aversion is seeing the four indices tracked here potentially carving out lower highs against the YTD peaks. Contagion fears around the ongoing Evergrande crisis are continuing to dog markets here with. Additionally, a spate of more hawkish comments from Fed members yesterday is helping lift USD and is once again putting a stronger focus on Fed tapering.
Among the Fed members yesterday who commented on inflation and the need for tapering was NY Fed president Williams (typically more dovish) who now also concludes that tapering “may soon be warranted”, highlighting the more hawkish shift in the Fed. On the back of last week’s more hawkish message from the BOE, investors are spooked around the potential reduction in QE over coming months.
Looking ahead today the big focus will be on comments due from Fed chairman Powell. In light of the hawkish shift seen from other Fed members, there are clear upside USD risks heading into today’s comments, which hold the potential to driver equities markets lower still.
Technical Views
DAX
The sell off in the DAX this week is seeing the market probing below the 15486.96 level as of writing. With indicators both turned lower, there are risks of a continuation lower here putting the focus back on the 15078.83 level. To the topside, bulls will need to see price back above the 15743.01 level to alleviate near term bearishness.
S&P500
The current sell-off from the 4475.25 highs is potentially a very bearish development for the market, carving out a lower high against the 4545.25 highs. With indicators both turned lower here, a break below the 4383.50 level will turn the focus back to the 4295.75 level, a break of which will signal a trend reversal lower in the medium term.
FTSE
Following the recent failure at the 7137 level, price is now testing the bullish trend line from YTD lows. With indicators just about still in the green here, bulls will need to see this region (extending down to support at 6968.7) hold. Below there, however, the focus will turn to 6895.6 and 6806.5 thereafter.
NIKKEI
The index is in a very interesting place technically. The recent test of the 30502.8 level now risks becoming a double top formation if price breaks below the 29464.9 level. Bulls will need to defend this level to keep the focus on further upside. Below there, the focus will shift to the broken bear trend line and deeper support at the 28356.6 level.
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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.