European Open: ‘Jack in the box’ trading continues

When the force which keeps prices suppressed is removed, price action behaves like a freshly-opened Jack in the box. And that’s what we saw during Asian indices overnight.

Charts (2)

Asian Indices:

  • Australia's ASX 200 index rose by 112.3 points (1.54%) and currently trades at 7,426.20
  • Japan's Nikkei 225 index has risen by 424.11 points (1.49%) and currently trades at 28,880.66
  • Hong Kong's Hang Seng index has fallen by -28.75 points (-0.12%) and currently trades at 23,954.91
  • China's A50 Index has risen by 182.67 points (1.16%) and currently trades at 15,969.88

UK and Europe:

  • UK's FTSE 100 futures are currently up 3 points (0.04%), the cash market is currently estimated to open at 7,342.90
  • Euro STOXX 50 futures are currently up 8 points (0.19%), the cash market is currently estimated to open at 4,284.20
  • Germany's DAX futures are currently up 18 points (0.11%), the cash market is currently estimated to open at 15,831.94

US Futures:

  • DJI futures are currently up 492.4 points (1.4%)
  • S&P 500 futures are currently up 86.25 points (0.53%)
  • Nasdaq 100 futures are currently up 18.25 points (0.39%)

20211208moversFXfx

Asian equities jump higher in line with sentiment

Of course, the force which suppressed prices was the Omicron variant and there now seems to be no shortage of headlines suggesting all is well. And that lift in sentiment saw Asian equities race out of the gates as they tracked Wall Street higher in a similar fashion.

The ASX 200 did its best impression of a telegraph pole by opening at the low and now on track to close at the high of the day, and currently up around 1.6%. Japan’s markets were the leaders with the Nikkei 25 rising over 1.9% and China’s A50 up around 1.1%. The Hang Seng was underwater slightly, weighed down by Kaisa which missed a debt payment and Evergrande hit a new low.

GBP feels the weight of commodity FX

The US dollar index saw a false break above 96.43 resistance yesterday and closed with an indecision candle. Traders appear hesitant to front-run Friday’s CPI data, and perhaps there are downside risks given the consensus is for already hot-inflation to heat up further. If so, perhaps euro saw the low for the week yesterday above the 1.1 handle.

The British pound felt the might of commodity FX yesterday, with GBP/AUD hitting a 1-week low yesterday and sliding a little further today. GBP/NZD printed a bearish outside day at its 2-month high, whilst GBP/CAD fell to our initial 1.6730 target near the November low. We favour GBP/CAD for further shorts.

GBP/CAD teases November low

20211208gbpcadFX

The daily chart remains in a strong downtrend, and momentum realigned with that trend yesterday after repeatedly failing to break above 1.7100. Yesterday’s bearish candle broke trend support with ease and prices are now hugging the lows. We suspect any upside bounce from here could be limited and a break back to the March 2020 low (1.6551) to be the path of least resistance.

BOC rate decision is the main event today

It’s their final show of the year and the central bank is expected to hold rates at 0.25%. Yet with economists expecting four hikes in 2022 they’ll be looking for some form of assurance current expectations are correct. Therefore, the contrarian approach is to short CAD should the central bank not be as hawkish as hoped today, whilst the biggest bullish surprise (although not likely) would be for a hike at this meeting. And with GBP/CAD at a key support level heading into the meeting it provides a clear pivotal level for markets to trade around.

FTSE 350: Market Internals

20211208moversFTSEfx

FTSE 350: 4199.99 (1.49%) 07 December 2021

  • 293 (83.48%) stocks advanced and 53 (15.10%) declined
  • 18 stocks rose to a new 52-week high, 1 fell to new lows
  • 55.84% of stocks closed above their 200-day average
  • 76.35% of stocks closed above their 50-day average
  • 17.66% of stocks closed above their 20-day average

Outperformers:

  • + 9.26% - Moonpig Group PLC (MOONM.L)
  • + 9.10% - Trustpilot Group PLC (TRST.L)
  • + 8.10% - Network International Holdings PLC (NETW.L)

Underperformers:

  • -2.67% - Baltic Classifieds Group PLC (BCG.L)
  • -1.94% - B&M European Value Retail SA (BMEB.L)
  • -1.90% - Domino's Pizza Group PLC (DOM.L)

 

Up Next (Times in GMT)

20211208calendarGMT

 

 

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log in if you’re already a customer.
  2. Search for the pair you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.