European Open: GBP trades around its 23-month low ahead of NFP

Asian Indices:

• Australia's ASX 200 index fell by -173.4 points (-2.35%) and currently trades at 7,191.30
• Japan's Nikkei 225 index has risen by 180.03 points (0.67%) and currently trades at 26,998.72
• Hong Kong's Hang Seng index has fallen by -741.79 points (-3.57%) and currently trades at 20,051.61
• China's A50 Index has fallen by -361.57 points (-2.69%) and currently trades at 13,102.35

UK and Europe:

• UK's FTSE 100 futures are currently down -22 points (-0.29%), the cash market is currently estimated to open at 7,481.27
• Euro STOXX 50 futures are currently down -10 points (-0.27%), the cash market is currently estimated to open at 3,686.63
• Germany's DAX futures are currently down -24 points (-0.17%), the cash market is currently estimated to open at 13,878.52

US Futures:

• DJI futures are currently down -28 points (-0.09%)
• S&P 500 futures are currently down -24.25 points (-0.19%)
• Nasdaq 100 futures are currently down -5.75 points (-0.14%)

Sentiment remained fragile for stock investors overnight with the majority of the main benchmarks across Asia flashing red. Despite the Fed saying they don’t plan to hike in 75-bps increments, some think they should to tame inflation even though it further erodes gross and risks the possibility of tipping the economy into a recession.

Futures markets for European and the US are all pointing to a weaker open, and that has seen the US dollar retain a bid due to safe-haven flows and rising yield differentials.

FTSE 100:

A relatively simply setup has appeared on the FTSE 100 for bears to consider. Whilst the 50-day eMA has provided this week, a bearish outside bear on Wednesday and elongated shooting star pattern yesterday suggest a swing high is in the making. A break beneath 7475 confirms the Tuesday’s candle as a hanging man and, given yesterday’s false break of 7600, we suspect the high has been seen for the week. 7400 makes a viable downside target for today and we see the potential for the FTSE to now move back down to 7350, and perhaps even break it.

FTSE 350: 4177.55 (0.13%) 05 May 2022

• 138 (39.43%) stocks advanced and 204 (58.29%) declined
• 10 stocks rose to a new 52-week high, 31 fell to new lows
• 26% of stocks closed above their 200-day average
• 98.86% of stocks closed above their 50-day average
• 9.43% of stocks closed above their 20-day average

Outperformers:

• + 9.28% - Trainline PLC (TRNT.L)
• + 5.67% - Morgan Advanced Materials PLC (MGAMM.L)
• + 5.47% - PureTech Health PLC (PRTC.L)

Underperformers:

• -10.03% - Virgin Money UK PLC (VMUK.L)
• -9.02% - Hikma Pharmaceuticals PLC (HIK.L)
• -8.55% - Hiscox Ltd (HSX.L)

GBP/USD consolidates near its 23-month low ahead of NFP

The BOE hikes rates yesterday as expected yet sent the pound broadly lower as they warned that growth could sow sharply over the next 18 months. Inflation is also expected to peak at an average of around 10% in Q4, which means they’ll be forced to raise rates further despite the bleak outlook for growth.

The US dollar appears to be form ahead of today’s nonfarm payroll report and the British pound is on the back ropes. Consolidating just off its 23-month lows, we would prefer to fade into resistance zones or enter on a break to new lows to target the support zone around 1.2252 – although 1.2200 also makes a viable target to consider should volatility remain elevated.

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