European Open: Vol Subsides Ahead of BOE, Rising Wedge on FTSE
Matt Simpson August 5, 2021 5:54 AM
Volatility is on the low side as we approach today’s BOE (Bank of England) meeting, and we don’t expect that to last. Meanwhile the FTSE is forming a potential bearish reversal.
- Australia's ASX 200 index rose by 13.4 points (0.18%) and currently trades at 7,516.60
- Japan's Nikkei 225 index has risen by 123.1 points (0.45%) and currently trades at 27,707.17
- Hong Kong's Hang Seng index has fallen by -51.99 points (-0.2%) and currently trades at 26,374.56
UK and Europe:
- UK's FTSE 100 futures are currently up 2.5 points (0.04%), the cash market is currently estimated to open at 7,126.36
- Euro STOXX 50 futures are currently up 3.5 points (0.08%), the cash market is currently estimated to open at 4,148.40
- Germany's DAX futures are currently up 10 points (0.06%), the cash market is currently estimated to open at 15,702.13
- DJI futures are currently down -323.73 points (-0.92%)
- S&P 500 futures are currently up 17.75 points (0.12%)
- Nasdaq 100 futures are currently up 7.25 points (0.16%)
Asian indices hold onto gains
Asian equities held onto gains despite hawkish comments from Fed members yesterday. Positive earnings supported Japan’s equity markets which were the strongest of the session. The Nikkei is up 0.35% and the TOPIX is trading 0.3% higher. The Hang Seng is up just 0.15% but holding steady around 26,400 after its volatile ride last week and the ASX 200 touched a new record high during a low-volatility session. Futures markets are currently pointing to a slightly higher open for Europe.
The FTSE is grinding higher in its usual fashion. Although with each cycle higher seen with lower momentum, and prices now reaching resistance around 7150, we have our eyes on a potential bearish wedge pattern.
However, a word of caution with such patterns; wedges do have the ability to extend in the direction of the underlying trend and squeezing out ‘one more high’ before finally breaking counter to the trend. So, it could in fact rise towards the 7170 high and still put in upper spikes before reversing (assuming it does at all). Therefore, waiting for a break of a swing low and / or trendline can help reduce false breaks.
Also keep on mind the BOE meeting today at 12:00 BST which leaves the FTSE vulnerable to spikes of volatility. But, for now, a break below 7100 may be enough to confirm a near-term bearish reversal.
FTSE 350: Market Internals
FTSE 350: 4101.64 (0.26%) 04 August 2021
- 219 (62.39%) stocks advanced and 126 (35.90%) declined
- 48 stocks rose to a new 52-week high, 2 fell to new lows
- 77.49% of stocks closed above their 200-day average
- 70.94% of stocks closed above their 50-day average
- 24.5% of stocks closed above their 20-day average
- + 6.10% - Entain PLC (ENT.L)
- + 4.11% - Future PLC (FUTR.L)
- + 4.03% - SSE PLC (SSE.L)
- -9.33% - Ferrexpo PLC (FXPO.L)
- -6.56% - Morgan Sindall Group PLC (MGNS.L)
- -4.35% - Dr Martens PLC (DOCS.L)
Forex pairs remain in tight ranges:
It was minor ranges for currencies with a slight air of risk-on, with AUD and NZD currently the strongest majors and JPY and CHF the weakest. So far this week, NZD and AUD are the strongest (thanks RBNZ) and CAD is the weakest as it remains pressured from lower oil prices.
EUR/GBP is holding above key support the key support zone around 0.8500. A bullish pinbar formed a slightly higher low above it yesterday, although prices are coiling up on the four-hour chart and its breakout direction is a flip of the BOE coin at this stage. 0.8500 remains a pivotal level.
GBP/USD broke out of a bullish channel on the four-hour chart last week and has been meandering around 1.3900 since. However, a strong bearish candle formed yesterday and prices and now trying to hold above the weekly pivot point at 1.3873 which is clearly the pivotal level for today.
A bearish outside candle formed on EUR/USD yesterday and prices have been anchored to its lows overnight. Whilst it is vulnerable to some intraday bullish spikes out bias remains bearish below 1.1900.
Learn how to trade forex
Commodities basked falls for fourth day:
The Thomson Reuters CRB commodity basket fell for a fourth day and closed beneath its (now invalidated) bullish hammer, although found support at the 50% retracement level. The daily trend remains bullish above 204.93 (which leaves plenty of downside) but we appear no closer to a trough as of yet. And that paints a potentially bearish picture for energy markets.
View today’s video: WTI Closes Below $70, Silver Fails to Break Key Resistance
Up Next (Times in BST)
How to trade with FOREX.com
Follow these easy steps to start trading with FOREX.com today:
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.