Asian Equities Sink on Covid Fears
It’s been a mixed start to the week for global equities benchmarks with US and European asset markets remaining on an upward trajectory while UK and Asian markets continue to pull back. Fears over rising infection numbers in the UK and Japan have been a big blow to the FTSE and Nikkei. Japan is expected to announce an extension of its emergency situation currently in place in Tokyo and other regions. The legislation, which imposes lockdowns, is expected to be extended until at least mid September. In the UK, rising variant numbers are raising concerns of the risk of a return to lockdown post-summer which could add further strain to the economy just as the BOE has begun to lay out its tightening roadmap.
Looking ahead this week, away from COVID, the key focus will be on the FOMC meeting minutes. Traders will be keen to gauge any clues as to when the Fed might begin tapering of assets given that the discussion has begun to gather more traction recently. Should the minutes highlight any hawkish tilt to discussions this would likely hamper any further upside in the S&P in the near term.
Technical Views
DAX
The index remains near highs following the recent breakout above the 15743.11 level. While the move has lost some momentum recently, highlighted by flattening RSI and MACD indicators, while above that support, the focus remains on further upside near term.
S&P500
The recent breakout from the contracting triangle pattern which formed mid trend has seen price trading up to highs of around 4480. While price is paused for now, with both RSI and MACD bullish there is room for a continuation higher. Should we see any correction lower, however, bulls will be looking to defend support at the 4383.50 level.
FTSE
The correction from the recent test of the 7241 level has seen price trading back down to challenge support at the 7137 level. With RSI turning lower and the MACD contracting, near term prospects are weakening here. Should price break below the level, look for a retest of the broken bear channel top as next support ahead of the 6968.7 level.
NIKKEI
The latest failed break of the bearish trend line from YTD highs has seen price reversing sharply lower. The index has now broken below the 27422.9 level and while below here is on course to test deeper support at the 26932.1 level next, in line with both RSI and MACD turning lower.
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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.