Equities As Dollar Falls Amidst US Tensions

Global equities benchmarks continue to gain ground this week despite emerging risk factors which have taken the shine off the post-lockdown recovery now underway. The backdrop of US/China tensions, which rose to the forefront last week ,has now seen a shift in focus amidst the ongoing unrest in the US. With protests and riots stretching into their seventh night across 141 cities, the president has threatened to deploy the military nationwide in a bid to quell the uprising. Ugly scenes of police brutality against protestors, as well as looting and widespread disorder, have created an extremely distressing environment in which both police and civilians have lost lives. The protests began in the wake of the killing of an unarmed black man, George Floyd, by police last week and have now continued into a broader call for an end to racial inequality and injustice in the US.

The US Dollar has come under heavy selling pressure over the last week amidst the social unrest there, allowing equities further room to move higher. A slew of central bank meetings this week is likely to provide a supportive environment. While little is expected in the way of further action at this point, the BOC and ECB are likely to follow in the footsteps of the RBA, who met overnight, and reaffirm their commitment to further easing if necessary.

Technical Views

DAX (Bullish above 11254.91)

From a technical viewpoint. The DAX remains well supported here and is now testing the 11853.13 level resistance along with the top of the bullish channel. Price is sitting firmly above the yearly S1 and VWAP, both around 11254.91 and while above here, bias remains bullish.

S&P500 (2972.25)

From a technical viewpoint. The S&P continues to rally above the 2972.25 level, albeit at a slower pace of recent sessions. While above here, and with VWAP positive, the near term bias remains bullish with price due to retest the underside of the broken bullish channel next along with structural resistance at the 3115.75 level.

FTSE (Bullish above 5988.1)

From a technical viewpoint. The FTSE continues to trade within a narrow bullish channel and has moved above the monthly pivot (5988.1). Price is now retesting VWAP and is currently sitting back above it, keeping the near-term bias bullish with a focus on a test of the 6543 next.

NIKKEI (Bullish above 22787.5)

From a technical viewpoint. The Nikkei continues to break higher here with the index testing above the yearly pivot at 22310.4. Price is well supported and is on course to challenge the 22787.5 level next. To the downside, the main base of support sits down around the 20398.5 with VWAP in the vicinity also.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.