Recovery To Take Longer Than Thought?

Global equities benchmarks have been broadly supported, with indices across the US, Europe and Asia, trading in the green this week. However, upside momentum has been weakened and moved so far have bee shallow. The fundamental backdrop continues to be driven by the shift in focus towards the recovery effort as lock-downs being easing around the globe.

In the US, parts of the country have begun reopening while some nations in Europe have also begun easing lock-down measures. However, in terms of the projected recovery it has become clear over recent weeks that the bounce back from the damage suffered during the virus outbreak is likely to be longer than first thought. The US labour report on Friday highlighted the worst single monthly job loss on record over April with 20.5 million jobs lost. In the UK, the BOE is warning of the sharpest recession to hit the country in 300 years.

In Japan, the state of emergency was recently extended until May 31st mean that activity will remain greatly impaired until at least this data. China itself has been reporting fresh outbreaks of the virus following the lifting of its measures, raising concerns about the path to recovery for the rest of the world.

There are also rising concerns about the health of US/China relations and the impact that a further fallout could have on the global economy if trade negotiations break down again. The US has been highly active in criticising China for its management of the virus outbreak while China has hit out at the US over measures it has taken against Chinese journalists entering the US.

Technical Views

DAX (Bullish above 10481.66)

From a technical viewpoint. Following the breakdown below the bullish channel from 2020 lows, price has been stuck in a sideways range. While the monthly pivot continues to support at 10481.66, bias remains bullish. However, buyers will need to see price break above VWAP next to confirm a breakout higher.

S&P500 (Bullish above 2760)

From a technical viewpoint. The S&P continues to move higher within the bullish channel but is now facing the confluence of resistance among local structural highs, the yearly pivot and VWAP at the 2970.75 region. If price can break above here the upside recovery should gain better momentum again. Any fall lower will need to be supported at the monthly pivot ( 2760) to keep the bullish bias intact.

FTSE 100 (Bullish above 5788.2)

From a technical viewpoint. The FTSE remains supported above the monthly pivot (5788.2) though is yet to break the 6186.2 local highs. Bias remains tilted to the upside here, though, with VWAP still negative, any break below the monthly pivot could see a deeper reversal lower.

NIKKEI (Bullish above 20471)

From a technical viewpoint. The NIKKEI has been moving steadily higher over recent days with price now once again challenging the 20471 yearly S1 and the broken bullish trend line from 2020 lows. VWAP has turned positive here and if price can break above the level, attention will be on continued upside targeting the 22251.6 yearly resistance next.

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