Equities Bounce Back As USD Fall Continues on Dovish Fed Commentary 

Global equities benchmarks have seen a broadly positive start to the week. On the back of the gains we saw last week, linked to a softer-than-forecast US inflation report, equities traders are looking to extend the rally this week. While yesterday saw some intra-day volatility as bond yields turned higher, indices look to be making a much stronger start across the board on Tuesday. The better tone to trading can be attributed to comments from Fed vice chair Lael Brainard who yesterday commented that a reduced pace of tightening would likely be appropriate from next month. These comments were seen reinforcing the chances of a Fed pivot on the back of that October inflation report last week.

US PPI & UK CPI

Looking ahead, focus will now shift to today’s US PPI release. On the back of last week’s softer-than-forecast PPI reading, equities bulls will be hoping for an equally weak release today, helping pile more pressure on USD. Falling energy prices are also helping feed into equities bullishness this week, particularly in Europe where the DAX continues to improve. In the UK, tomorrow’s inflation data will be closely watched. With fears CPI might rise again as high as 10.5%, the FTSE looks vulnerable given the BOE’s signalling that further rate hikes will likely be necessary. Similarly, any downside surprise however, should see the index well bid, raising hopes for a peak in inflation.

Technical Views

DAX

The rally in the DAX continues to gather pace here following the breakout above the 14170.79 level. The index is now up more than 20% off the YTD lows. With both MACD and RSI bullish here, the focus is on a continuation higher while price holds above the 14170.79 level, putting focus on 14703.98 next.

S&P 500

The S&P is now sitting firmly above the 3910 level following the breakout last week which also saw price moving above the local bearish trend line. While above here, and with momentum studies bullish, the focus is on a continued push higher towards the 4153 level next and a test of the bear channel top.

FTSE

The recent rally in the FTSE has seen the index breaking back above the bullish trend line from YTD lows. With both momentum readings bullish here, the focus remains on a continued push higher. Price is currently stalled around the 7362.6 level with 7575.8 the next objective for bulls.

NIKKEI

For now, the rally in the Nikkei is stalled against the 28356.6 resistance, following the breakout above the 27422.9 level. However, with both MACD and RSI bullish, the outlook remains skewed towards higher prices 27422.9 holds as support. Above 28356.6, the 29464.9 level is the next objective for bulls.