S&P 500, FTSE 100, DAX 40, Bitcoin analysis and news:
Abyssal start for the stock markets
Bad start to the week for risk appetite which sees European equities close at lows. The price action is largely an extension of the same concerns that plagued the market last week. However, while Fed policy has been a source of concern for some time, there is now the addition of heightened recession risks, we saw this flagged by the Bank of England last week in its economic outlook. At the same time, China is slowing as zero covid policies bite, while Europe’s proximity to the Russian-Ukrainian war will remain a drag on activity.
And now ?
There’s little I can see from a fundamental perspective that noticeably changes that feeling. That being said, the key economic data for the week will be the upcoming US CPI numbers, where a weaker than expected reading could provide some very short-term respite. (Learn more about the DailyFX Economic Calendar)
Along with that, tomorrow is Tuesday and given the current price action that we have seen since the end of last week, this could be setting up for a “Tuesday of Reversal”. Since the beginning of 2018, the average return on tuesdayit is after the S&P 500 fell from Thursday to Monday was 0.76% with a success rate of 68%. However, this would be undone if we see another ramp further up the wall fence. Remember that with the closure of spot trades in European equities, be aware of the potential for front running from now on.
Looking at the DAX, short-term support lies at the 23.6% Fib retracement (13,350) where no hold exposes the year-to-date lows at 12,400- 500. Meanwhile, on the upside, resistance lies at 14,400 and 14,800. Momentum indicators in the form of the DMI suggest that the path of least resistance is lower.
DAX 40 Chart: Weekly Timeframe
A rather disappointing outlook from the Bank of England, to say the least. While initially there was a hawkish twist with a 6-3 vote split. The three dissenters voting for a 50 basis point raise. The accompanying statement was extremely dovish, not only does the MPC see double-digit inflation by the end of the year, but it also sees growth contracting from the start of the year. In other words, stagflation. The BoE has all but said that market prices are far too aggressive for rate hikes as they see 3-year inflation significantly below their 2% target based on current market expectations. on rate hikes. In turn, although this has seen the pound come under significant pressure, this provides a nuance of support for the FTSE 100. Keep in mind, 2/3 of revenue generated by FTSE 100 companies comes from overseas, so repatriated profits are worth more when the pound falls. That being said, even the liquidation of the pound has not been enough to shield the FTSE from the current market turmoil.
Going forward, while inflation data will remain on the agenda, the BoE is worried about the cost of living squeeze. UK assets will become more sensitive to growth data going forward, including PMIs, retail sales and labor market data.
Last week’s vicious rejection of the 7600 handle keeps risks firmly on the downside. A close above 7620 would be needed to alter this outlook. But for now, the bias continues to sell rallies in equity markets.
FTSE100 Chart: daily time
Bitcoin approaches psychological support at 30k
Bitcoin is unable to escape the risky environment, keep in mind that the correlation between Bitcoin and the Nasdaq is at an all-time high. Therefore, regardless of how the Nasdaq (rates market) moves, we are likely to see similar action in Bitcoin. As such, it’s hard to be bullish on Bitcoin unless stock markets stabilize. That said, the cryptocurrency is now close to significant psychological support at 30k, where a false break below 30k could technically have upside potential.
Bitcoin Chart: Weekly Period
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