European Open FTSE breaks out of USDCAD consolidation and bounces back

Asian indices:

• Australia’s ASX 200 index fell -36.6 points (-0.49%) and is currently trading at 7,491.30
• Japan’s Nikkei 225 Index is down -409.34 points (-1.47%) and is currently trading at 27,378.64
• Hong Kong’s Hang Seng Index is down -306.67 points (-1.36%) and currently trades at 22,195.64
• China’s A50 index is down -28.9 points (-0.21%) and currently trades at 13,980.69

UK and Europe:

• UK FTSE 100 futures are currently down -3.5 points (-0.05%), the spot market is currently valued at 7,610.22
• Euro STOXX 50 futures are currently down -13 points (-0.34%), the spot market is currently valued at 3,904.85
• Germany’s DAX futures are currently down -43 points (-0.3%), the cash market is currently opening at 14,381.36

US Futures:

• DJI futures are currently up 16 points (0.05%).
• S&P 500 futures are currently down -10.75 points (-0.07%).
• Nasdaq 100 futures are currently up 2 points (0.04%).

Equity markets continued to feel the weight of the Fed’s hawkish comments overnight as Asian indices across the board traded lower. The Nikkei was the worst performer, falling around -1.7%. The weak Chinese Services Purchasing Managers’ Index also contributed to the slight risk aversion as the contraction was at its fastest since February 2020 and new orders hit a 6-year low.

Futures markets are pointing lower for European bourses, although the FTSE remains relatively flat and the index remains an outperformer of late.

FTSE: Market Internals

The FTSE 100 hit a 14 month high and closed above 6800 yesterday on above average volume. The four-hour chart is still in a strong uptrend and its 20-bar EMA has provided dynamic support. It has held above the weekly pivot point and broken out of a tight consolidation range and it is encouraging that it closed above the weekly R1 pivot and at the high of the day.

Ideally we would like to see the FTSE hold above the top of the previous consolidation around 7575 should it pull back, otherwise a break of yesterday’s high will suggest bullish continuation with 7650 as the initial target ahead of the February high.

FTSE 100 Trading Guide

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FTSE 350: 4269.86 (0.72%) 05 April 2022

• 176 (50.14%) stocks rose and 166 (47.29%) fell
• 22 stocks rose to new 52-week highs, 2 fell to new lows
• 37.32% of shares closed above their 200-day moving average
• 12.82% of shares closed above their 20-day moving average

Top performers:

• +5.73% – Baltic Classifieds Group PLC (BCG.L)
• +4.52% – Syncona Ltd (SYNCS.L)
• +4.33% – Hammerson PLC (HMSO.L)

Underperformers:

• -5.85% – Darktrace PLC (DARK.L)
• -5.31% – TI Fluid Systems PLC (TIFS.L)
• -5.18% – Moneysupermarket.Com Group PLC (MONY.L)

Today’s FOMC minutes may have been overshadowed

Hawkish’s comments from key Fed members yesterday likely overshadow today’s FOMC minutes as they point to a 50 basis point hike at the next FOMC meeting and a faster than expected balance sheet reduction. Daly believes they can raise interest rates without triggering a recession or stagflation, and Brainard sees controlling inflation (by raising interest rates) as their most important task.

Next is PMI data for Europe and Canada

Given the weakness in global PMIs since the war in Ukraine (and the fact that the February reports failed to capture that), it is likely that we will see further weakness today. The question is how strong and whether these reads will shrink on weak new orders.

However, should we see another hawkish surprise in today’s FOMC minutes combined with weak PMI print for Canada, USDCAD looks interesting for potential long setups.

The downtrend on the daily chart failed to register a daily close below the January low of 1.2453. Two bullish hammers have formed and a buy signal and bullish divergence has formed on the stochastic oscillator. In addition, the depths of the hammers have respected the lower Keltner band. Ultimately, we now see the potential for a mean revert and a break above 1.2500 on the charts and a move towards 1.2560 or close to the 20-day EMA. A daily close above these levels suggests it could be more than a mean reversion.

Next (times in BST)

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