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European Open: Japan’s Exports Rise To 11Yr High, Futures Point To Firmer Open

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Fundamental analysis of Forex market

Whilst Japan’s rising exports are good for domestic growth (after GDP contracted in Q1) it also points to increased global demand.

Asian Indices:

  • Australia’s ASX 200 index rose by 84 points (1.21%) and currently trades at 7,015.70
  • Japan’s Nikkei 225 index has risen by 20.45 points (0.07%) and currently trades at 28,064.90
  • Hong Kong’s Hang Seng index has fallen by -211.79 points (-0.74%) and currently trades at 28,382.02

UK and Europe:

  • UK’s FTSE 100 futures are currently up 59.5 points (0.86%), the cash market is currently estimated to open at 7,009.70
  • Euro STOXX 50 futures are currently up 21 points (0.53%), the cash market is currently estimated to open at 3,957.74
  • Germany’s DAX futures are currently up 72 points (0.48%), the cash market is currently estimated to open at 15,185.56

Wednesday US Close:

  • DJI futures are currently down -16 points (-0.05%), the cash market is currently estimated to open at 33,880.04
  • S&P 500 futures are currently down -11.5 points (-0.09%), the cash market is currently estimated to open at 4,104.18
  • Nasdaq 100 futures are currently down -0.5 points (-0.01%), the cash market is currently estimated to open at 13,237.41

Futures point to a higher open for European indices

The FTSE is set to open around 6980 according to futures markets, which is in stark contrast with yesterday’s dire open which gapped lower to close down -1.2%. This makes today’s pivot zone around 6980 – 7000, as a break above this psychological barrier would be a small victory for bulls and could trigger some short covering. Whilst if it caps as resistance and reversal patterns form at or beneath it, we’d be keen to explore further shorts.

Futures across Europe are also pointing higher too, unlike the US which are slightly lower. But could simply be the market trying to fill the void between European and US close, as European bourse experienced the more bearish session than their US counterparts. As for Asia it is a little mixed, with the ASX 200 recouping 0.8% of Wednesday’s losses and currently the strongest major benchmark, whilst the Hang Seng and KOSPI 200 trade around -0.8% lower.

FTSE 350: Market Internals

FTSE 350: 6950.2 (-1.19%) 19 May 2021

  • 95 (27.07%) stocks advanced and 247 (70.37%) declined
  • 13 stocks rose to a new 52-week high, 4 fell to new lows
  • 83.48% of stocks closed above their 200-day average
  • 18.8% of stocks closed above their 20-day average

Outperformers:

  • + 11.3 – John Laing Group PLC (JLG.L)
  • + 10.7% – Future PLC (FUTR.L)
  • + 7.66% – 4imprint Group PLC (FOUR.L)

Underperformers:

  • -5.09% – Hochschild Mining PLC (HOCM.L)
  • -4.99% – Micro Focus International PLC (MCRO.L)
  • -4.71% – Anglo American PLC (AAL.L)

Australia’s unemployment falls, yet job growth declines

Australia’s unemployment fell for a sixth consecutive month to a one-year low of 5.5%, although 36k jobs were lost driven by a fall of -64k part-time jobs. AUD/NZD rose to a six-day high and tested 1.0800, and if prices can rally above here is suggests the minor break below its December bullish trendline was just a mere blip. AUD/CAD recouped yesterday’s losses after a daily close beneath the February 26th low. And EUR/AUD retraced a little overnight yet remains structurally bullish, after is strong bullish breakout yesterday. Our bias remains bullish above the 1.5700 breakout level.

GBP/USD appears set for another retracement after forming a bearish engulfing candle yesterday, a day after its rally failed to retest the February high of 1.4243. And GBP/JPY formed a bearish outside day (and long legged Doji) to warn of its own retracement from multi-year highs.

At two-bar bearish reversal pattern formed on EUR/USD yesterday (dark cloud cover) and a break beneath the pattern’s low of 1.2150 confirms it. Keep an eye on the US dollar index as this will obviously also need to rise but it should be noted that it rallied yesterday, after finding support at the February low.

EUR/GBP traded above our 0.8620/30 resistance zone overnight, although a bearish pinbar formed which closed back beneath this key level. Should prices break above yesterday’s pinbar high (0.8643) then it is removed from the bearish watchlist for now, whilst a break 0.8600 suggests bears will have another crack at driving it lower.

A potential bullish trend is forming on EUR/CHF four-hour chart. Since breaking above 1.0988 resistance, prices have retraced and formed a three-bar bullish reversal pattern (morning star reversal). The 10-bar eMA is also providing support and the 10 and 20-eMA’s are fanning out to show an increase in bullish momentum. Bulls could consider entering upon low volatility retracements within yesterday’s range or waiting for a break above yesterday’s high to confirm the bullish reversal pattern. Our bias remains bullish above the 1.0982/88 support zone.

Commodities: Eyes on gold around 1875 resistance

Gold prices remain flat overnight against all major currencies, after XAU/USD printed an elongated Doji following a false break above 1875 resistance. Should indices manage to bounce today, we’d expect gold to come under pressure whilst 1875 holds as resistance (unless real yields begin to fall). But, given the CRM commodities index appears to be in a corrective phase, and one we do not yet believe to be complete, price action on gold could remain choppy at best at these highs, unless it decides to catch up with silver and embark upon a retracement.

Oil prices remains in a tight range after yesterday’s selloff in excess of -3%. Bears could seek bearish setups along the broken trendline brent’s daily chart, or see if prices remain below the 10 and 20-day eMA’s around 67.60/90. The key here is that we don’t want to see bullish momentum return, so ay rise in prices needs to be slow and steady before momentum needs to turn lower before we can confirm the bias.

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