FTSE Leading the Pack
Global equities benchmarks have started the week on a softer note with most indices leaning slightly into the red over the European morning on Tuesday. Despite the bank holiday in the UK yesterday, the FTSE is leading the pack so far this week with the UK index the only one of this group to be trading in the green.
The slight rebound in the US Dollar is weighing on US and Asian equities with both the Nikkei and the S&P pulling back from recent highs. With data continuing to show strength in the US, a further Dollar recovery could develop in the near term which could see the current pull back in equities deepening. Indeed, the buying in USD comes despite the Fed reaffirming its message that it sees no need to adjust policy this year in response to rising inflation.
In the UK, the continued drop in virus stats, as well as the ongoing momentum in vaccinations, is creating optimism that the reopening of the economy will not lead to a further breakout. The PM is set to announce a further easing of measures this month with hospitality venues expected to be allowed to return to offering indoor services, which should provide a significant boost for the economy.
In Europe, the latest data shows the Eurozone entered a double dip recession last quarter, cementing fears over the impact of the pandemic there. Many countries are experiencing a third wave of the virus with lockdown measures extended or reversed as a result.
The DAX has fallen back below the 15311.01 level for now and is trading back within the bullish channel which has framed the rally this year. Despite the pull back, the index remains well supported near April’s lows, keeping the focus on further upside. Should price slip from here, however, 14783.12 is the next support zone to watch.
The S&P continues to hold in a tight, narrow block of price action around the 4180.50 level hugging the upper line of the rising wedge formation. The focus is still on further upside for now, though, with momentum studies weakening, there is a risk of a dip back towards 3964.25, the key downside level to note.
The FTSE is once again attempting to breakout above the 7025.8 level as the break of the triangle pattern over Jan-Mar continues to probe higher. Should price break higher here, the 7235.9 level is the next upside level to note. To the downside, bulls need to defend 6803.1 to keep upside momentum intact.
The Nikkei continues to hover around the 29005.6 level following the failed break of the triangle pattern which was stalled by demand at the 28372.5 region. With price still within the broader bull channel, the focus is on continued upside. However, should the channel break, 27701.1 is the next downside marker to note.
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