Two trades to watch: FTSE, EUR/USD

FTSE falls as growth fears weigh, PMIs due. EUR/USD extends gains, PMI data up next

Charts (3)

FTSE falls as growth fears weigh, PMIs due

The FTSE and its European peers are heading lower, unable to hang onto gains from the previous session amid a lack of confidence in the outlook.

Concerns over a global economic slowdown have been a key theme at the World Economic Forum in Davos, where business and government leaders warned that the economic outlook has darkened.

UK PMI data is due to be released later and is expected to show that both services and manufacturing activity slowed slightly in May.

Services PMI is expected to slip to 57.3 from 58.9. Manufacturing PMI is expected to fall to 55.1, down from 55.8 in April.

The level 50 separates expansion in activity from contraction.

UK public sector net borrowing was £18.6 billion in April, the fourth-highest April on record, although down £5.6 billion from a year earlier, mid pandemic.

Where next for the FTSE?

The FTSE has been forming a series of lower highs since early April. However, it has also seen a series of higher lows since mid-May.  The index currently trades caught between its 20 & 50 sma with the RSI neutral.

Buyers need to retake the 50 sma at 7485 and break above 7545 to create a higher high and open the door to 7600.

Sellers could look for a break below the 20 SMA at 7405 to test the April low of 7310. Strong support can be seen at 7225, the May 19 low.

ftse chart

EUR/USD extends gains, PMI data up next

EUR/USD jumped over 1% higher yesterday after ECB governor Christine Lagarde strongly signaled to rate hikes across the summer. She said that she expects the ECB to bring rates out of the negative territory by the end of September.

Attention is now turning to PMI data from both the eurozone and the US. Both are expected to show a slight decline but remain in the mid-50s amid surging prices and supply chain disruptions.

Speeches from Lagarde and Powell are due later and could direct the pair.

Where next for EUR/USD?

EURUSD is extending its rebound from the 2022 lows recapturing the 20 sms and rising above 1.0650 resistance. This combined with the bullish RSI keeps buyers hopeful of further upside.

Resistance can be seen at 1.0760 the 50 sma and the April 15 low. A move above here opens the door to 1.0940 the April 22 high.

On the flip support can be seen at 1.0650 ahead of the 20 sna at 1.0540. A break below here opens to door to 1.0460 and 1.0420 the May 15 and May 13 lows.

EURUSD chart

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