Equities Under Pressure
It’s been a softer start to the week for benchmark global equities indices. We’re seeing a wave of red across the European open today as a range of factors combine to weigh on risk sentiment. Firstly, the recent string of better-than-expected US data points has reinvigorated Fed tightening expectations leading to a stronger US Dollar. There is now a growing level of expectation that the Fed will announce further tapering in December or, at the very least, provide more hawkish forward guidance. Looking ahead this week, preliminary quarterly GDP as well as core PCE, both for the US, will be the key data focus, with potential for plenty of market volatility if we see further USD strength.
Away from the Dollar, the COVID backdrop is also weighing on risk sentiment. In Europe, particularly, a fresh surge in infections has provoked the return of lockdowns in some countries and tighter restrictions in others. There are fears, however, that should the current wave intensify, key economies such as Germany and France will be forced to go back into lockdown. Such uncertainty is hitting investor sentiment hard, as reflected in the price action in the DAX. While leaders in the UK have said a return to lockdown is highly unlikely, there are fears that should the current European wave hit the UK, tighter restrictions will need to be brought back into place.
Technical Views
DAX
The sell off in the DAX this week has seen price breaking down below the rising channel and below the key 16015.97 level. While price holds below this level, and with RSI and MACD turning lower, the focus is on a move down to the 15743.83 level next.
S&P 500
The rally in the S&P continues to be held up by the 4692.75 resistance level. Price has been hugging the level for around a fortnight now and, while still within the bull channel for now, risks of a correction are growing. Should price turn lower from here, breaking beneath the bull channel, the focus will be on a test of the 45454.25 level next.
FTSE
The sell off in the FTSE has seen price reversing lower from a test of the 7362.6 level, breaking beneath the rising wedge structure and the 7241 level. While below here, the focus is on a further push lower towards the 7137 level, in line with bearish MACD and RSI readings.
NIKKEI
The Nikkei continues to grind higher within the bullish channel which has framed the rally off the October lows. Price is currently holding above the 29464.9 level though continues to be capped by the 30000 mark. For now, the focus remains on further upside while the bull channel holds.
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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.