European Open EURUSD breaks 12000 as USD Bulls Unwind

Asian Indices:

• Australia's ASX 200 index fell by -52.8 points (-0.75%) and currently trades at 7,012.80
• Japan's Nikkei 225 index has risen by 59.63 points (0.2%) and currently trades at 29,743.00
• Hong Kong's Hang Seng index has risen by 28.52 points (0.1%) and currently trades at 29,134.67

UK and Europe:

• UK's FTSE 100 futures are currently down -4.5 points (-0.06%), the cash market is currently estimated to open at 6,995.58
• Euro STOXX 50 futures are currently down -4 points (-0.1%), the cash market is currently estimated to open at 4,015.91
• Germany's DAX futures are currently down -6 points (-0.04%), the cash market is currently estimated to open at 15,362.39

Monday US Close:

• The Dow Jones Industrial fell -123.04 points (-0.36%) to close at 34,077.63
• The S&P 500 index fell -22.21 points (-0.54%) to close at 4,163.26
• The Nasdaq 100 index fell -134.24 points (-0.96%) to close at 13,907.67

Japan’s Indices Lead the Way Lower

Japanese equities continued to weaken as Japan grapples with its rise in COVI-19 cases. Olympics chiefs are to visit Japan due to the latest surge, bringing into question once again if the games will be able to go ahead. The ASX 200 was also lower, with all sectors in the red and banking and technology stocks weighing on the index.

Futures markets point to a slightly softer open for the FTSE 100, DAX and Euro STOXX 50. The DAX produced a 2-bar bearish reversal yesterday (Dark Cloud Cover) from its record high. If prices can remain supported above 15,300 then perhaps bulls can still take the index to new highs, whilst a break beneath 15.277 confirms the bearish reversal pattern. A break below 15,100 warns of a larger countertrend move.

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FTSE 100: Market Internals

After retesting its 14-month high, the FTSE traded lower in the second half of yesterday’s session, falling briefly below 7000 before closing at 7003.40. This invalidated the bull flag mentioned in yesterday’s report. For today, its all about that 7k level. Can it regain its footing and break to new high? It will need to be quick if it is going to, because heading into today’s session we see the potential for another dip lower. A break of the bearish engulfing candle on the four-hour chart brings the lower trendline into focus, around 6970.

FTSE 100: 7000.08 (-0.28%) 19 April 2021

• 65 (64.36%) stocks advanced and 33 (32.67%) declined
• 84.16% of stocks closed above their 200-day average
• 92.08% of stocks closed above their 50-day average
• 90.1% of stocks closed above their 20-day average
• 3 hit a new 52-week high, 0 hit a new 52-week low

Outperformers

• + 3.65%   -  EVRAZ plc  (EVRE.L) 
• + 3.30%   -  Tesco PLC  (TSCO.L) 
• + 2.81%   -  Next PLC  (NXT.L) 

Underperformers:

• -2.53%   -  London Stock Exchange Group PLC  (LSEG.L) 
• -2.28%   -  Rolls-Royce Holdings PLC  (RR.L) 
• -1.70%   -  Hikma Pharmaceuticals PLC  (HIK.L) 

Forex: Dollar Extends its Lows

The US dollar index (DXY) extended losses to fall to a fresh 7-week low overnight. Having closed beneath 91.30/40 support yesterday it appears set to close lower for the third consecutive week, and we’re not even halfway through week yet.

• EUR/USD extended its gain above 1.2000 after posting a solid close above it yesterday. The euro rose a further +0.2% during Asian trade on top of yesterday’s 0.5% rally. USD/JPY dipped marginally below 108 overnight after falling -0.6% yesterday.
• The British pound has retraced slightly overnight after posting solid gains across the board yesterday. It’s the strongest major this week and third strongest over the past month (with CHF and EUR taking top spot).
• EUR/GBP fell to an 8-day low, in line with our bias outlined in yesterday’s European open. It reached our initial target of 0.8600 and prices are now retracing, but bears may be tempted to load up on any rebounds towards 0.8640 resistance.

GBP/USD enjoyed its most bullish day in three months yesterday and tested 1.4000 resistance. The market remains anchored to yesterday’s highs, although the potential for a minor retracement is apparent given 1.4’s round number status and the fact it capped as resistance three times in March. Moreover, prices on the four-hour chart are extended beyond the upper Keltner band to warn of potential exhaustion at its high. However, due to the increase of bullish momentum we see any retracement as opportunity for bulls to load up.

• Bulls could seek bullish setups above the 1.3900/19 support zone.
• A strong break below 1.3900 invalidates the near-term bullish bias.
• A break above 1.4020 assumes bullish continuation.

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Gold’s Rally Stopped in its Tracks:

Gold was effectively flat overnight and trades around 1770. Resistance was found at its 200-day eMA and the yellow metal also produced a two-bar bearish reversal (Dark Cloud cover) which is confirmed with a break beneath Friday’s low. Silver also fell from its recent high but has so far remained supported above 25.66.

Oil futures nudged their way to new highs in line with our bullish bias, helped on their way that Europe’s pandemic recovery may be speedier that first though. WTI hit $64.0 at a 1-month high whilst brent futures currency trade around 67.75.

Up Next (Times in BST)

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