Market Overview
Market sentiment is again starting to come under pressure once more as the oil price slide has gathered pace. The lower close on Wall Street last night came as oil fell by another 3% hitting risk appetite across the asset classes from equities to forex and driving investors into safe havens. In this environment the yen is a key barometer and with the Japanese classic safe haven moving stronger again this does not bode especially well for trading confidence. With the S&P 500 closing 0.3% lower, Asian markets have been weaker across the board. The Nikkei was down 2.4% amidst the pressure from a stronger yen. This is driving weakness in the early European session. It is the turn of the service sector PMIs (and also composite PMIs) today and focus will be on whether the recent improvements in Europe and the US can be sustained.
In forex markets the dollar has started to claw back some of its poise, with the weakness in the oil price hitting risk sentiment and meaning that the commodity currencies are under a bit of corrective pressure. The RBA holding rates at 2.0% and refraining from talking the currency lower has helped the Aussie to perform well early today. The big signal here though is the strengthening yen which now means that Dollar/Yen is back below 111. The gold price has jumped by over $10 in the Asian session but again it will be interesting to see if the move can be sustained.
An array of PMI data from the Eurozone will be announced early in the session with the composite PMI for the region at 0900GMT expected to improve to 53.7 (from 53.0). The UK services PMI is at 0930GMT and is expected to improve to 53.7 (from 52.7), whilst the ISM Non-Manufacturing is at 1500GMT and is expected to read at 54.0 from 53.4). The US trade balance is at 1330GMT and is expected to deteriorate to -$46.2bn (from -$45.7bn). Finally there are also the JOLTS jobs openings at 1500GMT which are expected to dip slightly to 5.50m (from 5.54m).
Chart of the Day – German DAX Xetra
Equity markets are coming under pressure again and the DAX is showing a series of concerning corrective signs that suggest that the February/March rally has lost upside impetus and a downside move is developing. With a consistent failure to really break away from the resistance band that had built up between the key 61.8% Fib retracement at 9897 and the old key pivot at 10,122, the bulls have just lost the momentum. Until today there had been no explicit price breakdown, but the early move has confirmed a breach of not only the 9760 late March low but also the low of 9675 from Friday. The uptrend has now been decisively broken and the momentum indicators are throwing off negative signals, with the Stochastics falling at a six week low and the MACD lines also having crossed lower. The intraday hourly chart shows the uptrend has rolled over and the 61.8% Fib level has once again capped the rally yesterday around 9900. Between Friday’s reaction low at 9675 and yesterday’s low at 9732 now becomes the initial band resistance and a new trend is beginning to form. Expect pressure to grow on 9500 which is the key mid-March low. Initial support to watch out for today is a minor pivot at 9580.
