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Risk Appetite Healthy Ahead of Powell Comments

Looking across global equities benchmarks we’re seeing plenty of green during early European trading on Tuesday. It’s been a decent start to the week for most indices tracked here with broad gains seen against the backdrop of a weaker US Dollar. Some data weakness into the back end of last week saw yields losing some upside momentum, along with a correction lower in USD, which is helping lift bullish sentiment in equities markets.

Over the weekend, the PBoC issued a lower-than-forecast GDP target of 5% for the year ahead. While markets have been quick to shrug the news off for now on the back of recent Chinese data strength, we are seeing some caution in the FTSE which has been lower this week on the back of the news which caused a sharp drop in mining stocks.

Looking ahead this week there will be two clear focus points for traders. Firstly, we have Fed chairman Powell’s semi-annual two-day testimony which kicks off today. Traders will be carefully scrutinizing Powell’s comments ahead of the upcoming March FOMC. Then, on Friday we receive the latest set of US labor data. A bumper set of January figures ignited a fresh rally in USD, bolstering hawkish Fed expectations, and traders will now be looking to see if this strength continued last month or fell back.
 

Technical Views

DAX

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The rally off the 15163.41 lows has seen the market trading back up to test above the 15642.76 level, trading new 2023 highs. Momentum studies are still quite flat though, with price now back above the bullish trend line, focus is on a continuation higher near-term.

S&P 500

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For now, the S&P remains mid-range between the 3910 and 4153.50 levels. Price is currently testing the underside of the broken bull channel. With momentum studies close to turning bullish, the focus is on a continued push higher here and a challenge of the top of the range next.

FTSE

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The index is hugging the bull channel lows and support at the 7904.7 level. Momentum studies have flattened here, suggesting two way-risk. However, while price holds above the channel lows the focus is on a continued push higher. Should we slip below here, however, 7678.8 is the next support to note.

NIKKEI

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The rally in the Nikkei has seen the index breaking out above the bear trend line from last year’s highs and above the 27422.9 level. Price is now testing the 28356.6 level resistance and while this area is holding for now, the focus is on an eventual break higher in line with bullish momentum studies readings. 

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