USD Correction Leads Equities Higher
Benchmark global equities indices have had a broadly positive start to the week, extending the recent bull run across the indices tracked here. The ongoing correction in the US Dollar is helping keep equities price supported here. Friday’s US labour reports highlighted better jobs strength but failed to light any excitement under the Dollar. With jobs growth of around half a million and average hourly earnings falling back to 0.4%, there was little to suggest that the Fed is likely to advance the pace of its policy normalisation ahead of schedule. Powell warned last week that wage-price pressures remain weak and with Friday’s data serving as evidence of this, the Dollar looks set to remain subdued into the headline inflation reading tomorrow. Any disappointment tomorrow will likely see equities prices continue higher in the near term, extending the Dollar decline.
Away from the US Dollar, signs that global supply chain issues and the energy crisis are starting to abate are helping lift risk sentiment. Additionally, better optimism over the West being able to manage COVID through the winter (booster jabs, less restrictions than anticipated) is also adding to better investor sentiment, keeping the focus on further upside for asset prices in the near term.
Technical Views
DAX
The recent rally in the DAX has seen the market moving higher within a well-defined, narrow channel. Price has recently broken out above the former 16015.97 highs and with both MACD and RSI bullish, the focus is on further upside in the near term. To the downside, 15743.01 and the channel low are the next support areas to watch.
S&P 500
The ongoing rally in the S&P has seen the market climbing to fresh all-time highs. While momentum studies are flattening a little here, the focus remains on further upside while price holds above the 4545.25 level and remains within the bull channel.
FTSE
The breakout above the 7241 level in the FTSE has seen price trading up to just shy of a test of the 7362.6 level. With price continuing to trade higher within the recent bull channel, the focus remains on further upside here. However, caution is warranted as we are seeing bearish divergence creeping in on momentum studies, flagging possible reversal risks.
NIKKEI
The recent rally in the NIKKEI has faltered above the 29464.9 level, with price pulling back below the level as of writing. With indicators turning lower here, there is a risk of a deeper pullback unless bulls can reclaim the 29464.9 level, keeping the focus on 30502.8 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.