Equities Under Pressure Amidst USD Rally
It’s been a volatile start to the new week for global equities benchmarks. Monday saw the four indices tracked here each registering heavy selling as the resurgent US Dollar crushed risk sentiment. On the back of Friday’s stronger-than-expected US CPI report for May, hawkish expectations going into the June FOMC tomorrow have increased. The market had been widely anticipating a .5% hike from the Fed. However, as reported by the WSJ, a growing number of economists now see risks of a larger .75% hike in light of still-excessive inflation. The Fed itself has previously signalled a willingness to hike by a larger amount if necessary. Today’s US PPI number is also expected to come in strong and will likely see USD well-bid once again, creating fresh pressure on equities as they try to recover today.
With central banks tightening monetary policy around the world, markets are becoming increasingly fearful of recession risks given the dual impact of elevated inflation. In the UK we have seen a string of worrying data this week including a further negative monthly GDP number for May. With the unemployment rate shown to have increased by 0.2% last month, there are now fears that the economy is already back in recession. In the eurozone, the hawkish shift in sentiment at the ECB is raising fears over the impact on the single-market economy as it battles against heavy supply disruption and elevated inflation caused by the ongoing Ukraine conflict.
Technical Views
DAX
The rejection in DAX from the approach to 14791.27 has seen the market reversing sharply lower. Price is now trading back within the bear channel and, with both MACD and RSI bearish here, the focus is on a continuation lower towards 13067.45 next.
S&P 500
Recent losses in the S&P have seen the market collapsing below the bear channel support level. Price is currently sitting on structural support at the 3731.25 level. However, with both MACD and RSI bearish, the focus is on further downside with the 3613.50 level the next support to note unless bulls can get back above the broken channel low.
FTSE
The latest sell off in the FTSE has seen the market breaking below the bull channel once again. With price now sitting back on the ledge of support at the 7213.9 level, risks of a break lower are growing. With both MACD and RSI bullish, a downside break will put the focus on a test of the deeper 6990.4 level next unless bulls can get back above 7362.6.
NIKKEI
Yet another failed topside break of the large falling wedge pattern has seen the Nikkei reversing back inside the structure. Price has fallen back below the 27422.9 level and is now sitting on support at 26246 around the middle of the wedge. With both MACD and RSI bearish, the focus is on a break lower here and a test of the 25595.3 level 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.