Equities Slide Back Down on Fresh USD Strength

Benchmark global equities indices have been broadly lower across the European open on Tuesday. Resurgent strength in the US Dollar has quelled an earlier lift in risk assets which came on the back of reports yesterday that President Biden is looking at some of Trump’s trade-tariffs against China. Biden is said to be considering lifting tariffs on a basket of around $300 billion worth of Chinese goods. On the back of the lengthy trade war between the US and China and the disruption caused by the pandemic, such move would be welcomed by businesses in both countries.

Better-than-expected China data overnight also helped set a positive risk tone initially today. The China Caixin services PMI was seen rebounding firmly last month, helping offset fears of a slow-down in China. While the country appears to be bouncing back firmly from recent lockdowns, there are fears that further restrictions might return given the resurgent COVID outbreak the country is experiencing currently.

Despite the better start for risk assets today, equities have ultimately rolled over as USD enjoys a fresh wave of buying. US traders will return today following the holiday there yesterday and with hawkish expectations ahead of tomorrow’s FOMC minutes, USD looks set to rally further, creating additional pressure for risk assets.

Technical Views

DAX

The index continues to trade lower, travelling within the bear channel once again following an earlier attempt at a topside break. Price is now very close to testing the YTD lows around the 12462.59 mark. Given the bearish MACD and RSI signals, a break of these lows will put the focus on a move down to 11590.13 next. Bulls will need to see a break above the 13067.45 level to alleviate near-term bearishness.

S&P 500

Price recently failed at the latest retest of the 3910 level, with the market turning lower. Price is now sitting on support at the 3814.25 level creating plenty of two-way risk. Unless bulls can quickly get back above the current, local highs, focus is on a further push lower and an eventual downside break of the 3613.50 level.

FTSE

The rebound off the 6990.4 lows in the FTSE has seen the market trading back up to retest the underside of the broken bull channel. With the area holding as resistance for now, price has since turned lower and, while below the 7362.6 level, focus is on a rotation back towards current lows. Should we break above said level, however, 7558.7 is the next level to watch.

NIKKEI

For now, the index continues to trade around the mid-point of the large, falling wedge pattern which has framed price action over the year so far. To the downside, 25595.3 is the main support to note, a break of which is need to encourage fresh bearish momentum. To the topside, 27422.9 is the level bulls need to break to gather topside drive.