European Open: Flash PMI’s in Focus, Potential Bear Flag on EUR/GBP

A host of flash PMI’s are released for UK, Europe and US which will hopefully provide some pockets of volatility ahead of the weekend.

Charts (5)

Asian Indices:

  • Australia's ASX 200 index fell by -7.7 points (-0.1%) and currently trades at 7,378.70
  • Japan's Nikkei 225 index has risen by 159.8 points (0.58%) and currently trades at 27,548.00
  • Hong Kong's Hang Seng index has fallen by -275.61 points (-0.99%) and currently trades at 27,448.23

UK and Europe:

  • UK's FTSE 100 futures are currently up 18 points (0.26%), the cash market is currently estimated to open at 6,986.30
  • Euro STOXX 50 futures are currently up 10 points (0.25%), the cash market is currently estimated to open at 4,069.05
  • Germany's DAX futures are currently up 38 points (0.25%), the cash market is currently estimated to open at 15,552.54

US Futures:

  • DJI futures are currently up 286.01 points (0.83%)
  • S&P 500 futures are currently up 39.25 points (0.26%)
  • Nasdaq 100 futures are currently up 9.75 points (0.22%)


Asian indices mixed overnight

It was a mixed session overnight with Korea and Japan’s share markets rising on earning optimism, yet China’s markets were in the red and Australia’s ASX was effectively flat.

The ASX 200 resisted its urge to break to new highs as New South Wales increased its lockdown restrictions after recording its highest rate of new cases to date. Its effectively flat for the session and on track for a Rikshaw Man Doji, which underscores its hesitancy to break out this week.

The Nikkei 225 is up around 0.6% and holding above its 200-day eMA and lows from May and June.  The Hang Seng was the weakest performer after falling -1% and has remained beneath its 200-day eMA every day this week.


FTSE 350: Market Internals


FTSE 350: 4006.99 (-0.43%) 22 July 2021

  • 213 (60.68%) stocks advanced and 123 (35.04%) declined
  • 22 stocks rose to a new 52-week high, 0 fell to new lows
  • 77.49% of stocks closed above their 200-day average
  • 47.01% of stocks closed above their 50-day average
  • 20.23% of stocks closed above their 20-day average

Outperformers:

  • + 12.5%   -  Morgan Sindall Group PLC  (MGNS.L) 
  • + 5.96%   -  Volution Group PLC  (FAN.L) 
  • + 5.08%   -  NCC Group PLC  (NCCG.L) 

Underperformers:

  • -5.87%   -  Unilever PLC  (ULVR.L) 
  • -4.82%   -  Hammerson PLC  (HMSO.L) 
  • -4.32%   -  Persimmon PLC  (PSN.L) 


Forex: Composite PMI’s forecast to expand slightly faster

Flash PMI’s (Purchasing Managers Index) are the highlight of today’s calendar with data released from the UK, Europe and US. Clearly this places EUR, GBP and USD pairs into focus for news traders. As it is the first report and provides a forward look at growth expectations, it tends to be the more volatile than ‘final’ reports, especially if they deviate too far from expectations.

The overall expectation for these regions are for the composite PMI’s (the combination of manufacturing and services sectors) to expand slightly faster. And it is the services component which is expected to do the heavy lifting as manufacturing PMI’s are forecast to expand at a slightly slower rate. However, where the data points become interesting for currency traders is if we see a clear divergence between regions. For example, if UK data outperforms yet European data undershoots expectations, a logical expectation would be for EUR/GBP to rise.


EUR/GBP has been consolidating overnight and forming a potential bear-flag formation after two heavy days of selling. This has provided a strong downtrend on the hourly chart which remains technically bearish beneath the 0.8588 high. It therefore remains a pair which could favour fading into minor rallies or bears entering with a break to new lows.

However, also note it is consolidating around the weekly pivot ahead of the PMI reports. So, if prices are to spike higher we’d still consider bearish setups beneath the 0.8580 resistance zone, or a break beneath the flag brings the support zone around 0.8522 into focus.



Commodities:

Copper futures broke above trend resistance and rose to a two-week high overnight, finding resistance at the monthly pivot point. A weaker dollar could help it move towards 4.435 resistance but, given the US dollar index is holding above trend support, it may find itself stuck below the daily pivot as we head towards the weekend.

Gold is on track for a bearish engulfing week and break a four-week winning streak. Yet a bullish hammer formed yesterday to provide the third lower wick this week and suggest there is some demand above 1790 support. In short, it remains a market for rage trading strategies.

Silver was -0.25% lower overnight having found resistance at the 200-day eMA. Price action continues to suggest the two-day bounce is a countertrend move, so remain a case of trying to identify a swing high beneath the 25.78 high.


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