Equities Fighting To Recoup Losses Following Dollar Surge

A mixed start to the week for global equities benchmarks. The downside volatility across the back of last week has been somewhat recouped across some indices, while others remain subdued still. The squaring of long positions last week came amidst the hawkish shift in the Fed’s dot plot forecasts as the central bank upgraded its rates path projections. 13 of the central bank’s policy makers now see the bank lifting rates in 2023, up from just 7 in March. Additionally, the market is increasingly expectant of the Fed announcing tapering this year as a result of the sharp upward revisions to both growth and inflation forecasts.

Despite the upward move in USD, the Dollar has yet to follow through this week, allowing for some stabilisation in equities markets. However, there are plenty of risks ahead this week. Fed chairman Powell testifies at the Senate later today with CNBC and other news networks reporting that Powell is due to deliver an upbeat message on the economy while reiterating his view that inflationary upside will be transitory.

Looking ahead this week, the market will also be watching the latest BOE meeting which will take on greater focus amidst the delay of lockdown easing in the UK. Traders will be keen to hear how the bank judges the delay will impact the economy and how real the threat is from the burgeoning third wave outbreak there.

Technical Views

DAX

The reversal in the DAX saw price briefly piercing below the 15486.96 level before recovering back above the support. With MACD bearish here and the RSI turning lower, there are risks of a further downturn, however.

S&P500

The recovery in the S&P has seen price breaking back above the broken bullish trend line as well as the 4182.50 level. However, the market has yet to break back above the 4236.50 level and with MACD bearish and RSI lower, risks of further downside remain.

FTSE

The bounce in the FTSE this week has so far been capped at a retest of the broken bullish trend line. With MACD bearish and the RSI turned lower, while price holds below the trend line there are risks of a further break lower.

NIKKEI

The Nikkei is trading back within the bearish channel for now, following last week’s failed break. MACD and RSI are flattening out here suggesting room for a break either way. While price holds above the 28356.6 level, we could still see a further break higher in the near term. Below there, 26932.1 is the bear target.