Equities Under Pressure As USD Rebounds

Benchmark global equities indices are back under pressure this week as the rebound in the US Dollar weighs on asset prices. The current USD drive looks to be linked to comments made yesterday by Fed’s Bullard who noted that the current pace of inflation would likely warrant higher interest rate increases than currently projected for 2023. Currently, the dot plot forecasts show two hikes for next year. However, given the firm hawkish shift we have heard from the Fed, there are clear upside risks in these forecasts. With this in mind, incoming US data will be key to mapping USD flows and equities flows alike.

Markets have also been rattled today by news of the UK sending troops to the Ukrainian border amid an increasing number of news headlines citing that a Russian invasion might be imminent. With tensions heating up, there are concerns of a broader global dispute emerging from hostilities in the region.

Looking ahead this week, there is an absence of any tier one US data. However, we do have a slew of other key readings including UK and Canadian CPI and retail sales as well as Aussie employment data. Strong readings in these releases will no doubt add to the market’s focus on central bank tightening expectations for Q1, keeping equities pressured near term.

Technical Views

DAX

The failure at the latest test of the 16292.21 level risks forming a double top formation, with price now testing the rising trend line and support area around 15743.01. With MACD and RSI bearish, a break lower here will be firmly bearish, putting the focus on 15473.83 next.

S&P 500

The S&P is now once again testing below the long term bull channel support. With both MACD and RSI bearish, the focus is on a continuation lower here with the 4475.25 level the next big support to monitor. To the topside, bulls will need to see price back above the 4744 level to alleviate near term bearishness.

FTSE

The recent rally in the FTSE has seen the market attempting to breakout above the bull channel top. However, we are seeing selling pressure today with price currently reversing back under the 7558.7 level. With both MACD and RSI bullish, the focus is on further upside while the market holds above the 7444.3 level.

NIKKEI

The Nikkei continues to reverse lower from the latest test of the contracting triangle top. The market is currently testing below the 28356.6 level and, with both MACD and RSI bearish, the near term focus is on a move back down to test the triangle low and 27422.9 level support next.