The IndeX Files 01-09-2020 – Equities Rally Continues

Equities Rally Continues

Global equities benchmarks have seen another round of buying this week as the US Dollar continues to come under heavy selling pressure. The greenback has suffered heavy losses across recent sessions despite better US data as concerns over the ongoing COVID-19 outbreak take their toll on sentiment. Political uncertainty head of the US election is also having an impact here though markets have responded well to the recent news that US/China trade talks have resumed. The two leading global economies, which signed off on a phase one trade deal in January, confirmed that talks have now once again started with both sides reaffirming their commitment to the phase one trade deal. With regards to the Federal Reserve, recent comments from the bank’s vice chairman Richard Clarida, who signalled that the Fed might still use yield curve control as a monetary policy approach, have dampened USD sentiment further. Fed chair Jerome Powell told markets last week that the Fed will no longer be targeting 2% inflation and will instead look to achieve an average of 2% inflation, meaning that prices will be allowed to overrun the former target, in a bid to sustain the current accommodative monetary policy stance for longer. Many Fed watchers have subsequently downgraded their view on the Fed lifting rates in the near term, with Goldman Sachs now forecasting that the US central bank won’t raise rates until 2025.

Technical Views

DAX (Bullish above 12916.11)

From a technical viewpoint. The DAX is sitting back above the 12916.11 level now, having found support at the retest of the 50dma. While above here the near term outlook remains bullish though momentum studies are flagging reversal risks. Any move lower will turn attention to the 11861.85 level next.

The IndeX Files 01-09-2020

S&P500 (Bullish above 3391.75)

From a technical viewpoint. The S&P continues to move higher here following the breakout above 3391.75 highs. Price is moving firmly above both the 50dma and the rising trend line from May lows. While above here, the near term outlook remains firmly bullish.

The IndeX Files 01-09-2020

FTSE (Bullish above 5922.4)

From a technical viewpoint. The FTSE continues to move lower within the corrective bearish channel which has framed the reversal from 6543.4 highs. Price is currently sitting on the 5922.4 level support which, while intact, keeps the near term outlook bullish. Break below here, however, will turn attention to the 5626 level support next.

The IndeX Files 01-09-2020

NIKKEI (Bullish above 21758.9)

From a technical viewpoint. The NIKKEI continues to put pressure on the 23273.6 resistance. While the 50dma continues to provide support, momentum studies are displaying bearish divergence here, raising the risk of a correction lower. Should the market retrace from here, the first support to watch is the 21758.9 level.

The IndeX Files 01-09-2020

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