Strong Two-Way Risks For Equities Around FOMC
Benchmark global equities indices have had a decent start to the week following some initial weakness over the early European session yesterday. With USD trading higher over the open yesterday, asset prices came under pressure from what looked to be pre-positioning ahead of Wednesday’s FOMC. However, this initial USD strength abated over the day, leading to a rebound in risk sentiment which saw equities prices ending the day higher.
Looking across the indices track here, each market is in the green again today as USD weakness continues. Flows are likely to remain fairly changeable ahead of the FOMC tomorrow as traders grapple to establish a position ahead of the event. The market is pricing in a .75% hike, with smaller odds of a larger 1% hike. However, the greater focus is likely to be on the Fed’s outlook and guidance with traders looking to gauge how the Fed is likely to behave at the two remaining meetings of the year after this one.
Additionally, with the Fed due to issue a new set of economic forecasts and rates projections, If there is any sense of the Fed’s 2023 rates view having shifted at all, this will be key for markets. With this in mind, there is clear two-way risk for equities prices this week. Following the FOMC, we also have the BOE on Thursday which will be important for UK asset prices.
Technical Views
DAX
The market is turning higher once again from the latest test of the layer of support around the 12462.59 level. This has proved to be a key demand zone for the index and, while this area holds, chances of a fuller reversal higher remain intact, in line with momentum studies which are creeping higher. Bulls will need to see a quick break of 13067.45 however, to alleviate downside pressure.
S&P 500
The latest rejection at the 4153.50 level has seen the market trading back down to test support at the 3910 level. With both MACD and RSI bearish, risks of a further break lower are seen, keeping the 3613.50 lows in view as a downside target. To the topside, a break of current highs will put the focus on 4305 above.
FTSE
The market is currently trading mid range following the reversal lower ahead of the latest test of the 7558.7 level and bear channel top. Price is currently hovering around support at the 7213.9 level. Should price break below this level, 6994.2 is the next support to note.
NIKKEI
The reversal lower in the Nikkei from the approach to the 29464.9 level has seen the market trading back under the 28356.6 level. Price has broken below the local rising trend line also and is now sitting on support at the 27422.9 level. If price breaks below this area, the focus will be on a test of the rising trend line from YTD lows along with the 26246 level support.
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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.