European Open: Markets steady ahead of FOMC, calm before the storm?

Asian Indices:

• Australia's ASX 200 index fell by -51.2 points (-0.69%) and currently trades at 7,327.20
• Japan's Nikkei 225 index has fallen by -11.55 points (-0.4%) and currently trades at 28,420.78
• Hong Kong's Hang Seng index has risen by 48.99 points (0.21%) and currently trades at 23,684.94
• China's A50 Index has fallen by -89 points (-0.55%) and currently trades at 16,163.99

UK and Europe:

• UK's FTSE 100 futures are currently down 0 points (0%), the cash market is currently estimated to open at 7,218.64
• Euro STOXX 50 futures are currently up 8.5 points (0.2%), the cash market is currently estimated to open at 4,153.01
• Germany's DAX futures are currently up 41 points (0.26%), the cash market is currently estimated to open at 15,494.56

US Futures:

• DJI futures are currently down -106.77 points (-0.3%)
• S&P 500 futures are currently up 11.5 points (0.07%)
• Nasdaq 100 futures are currently up 6.75 points (0.15%)

Equities were mixed overnight as investors squared up or initiated positions ahead of this week’s central bank meetings. Mixed data from China points towards further growth concerns for the region. The China A50 is down around -0.5% although the Hang Seng posted a small gain of around 0.2%. Futures markets in the US have opened higher around 0.2%. The DAX is up 0.25% although the FTSE is effectively flat ahead of the open.

FTSE 350: Market Internals

7200 remains the key level for the FTSE 100 over the near-term. However, it has closed lower for five consecutive days which is a relatively rare event and has been known to mark inflection points in the past. And yesterday’s inverted hammer shows there is a slightly hesitancy to break directly lower.

FTSE 350: 4121 (-0.18%) 14 December 2021

• 135 (38.46%) stocks advanced and 206 (58.69%) declined
• 14 stocks rose to a new 52-week high, 9 fell to new lows
• 46.44% of stocks closed above their 200-day average
• 36.47% of stocks closed above their 50-day average
• 12.82% of stocks closed above their 20-day average

Outperformers:

• + 5.47%   -  Ocado Group PLC  (OCDO.L) 
• + 5.01%   -  CMC Markets PLC  (CMCX.L) 
• + 4.40%   -  Harbour Energy PLC  (HBR.L)

Underperformers:

• -12.3%   -  Rentokil Initial PLC  (RTO.L) 
• -8.62%   -  Oxford BioMedica PLC  (OXB.L)  
• -8.26%   -  Reach PLC  (RCH.L)

EUR/AUD builds a base at a cluster of support

We suspect volatility may remain contained ahead of the FOMC meeting, which is near the end of the US session. Therefore, we’ll look at a currency cross today in hope that it is at least one step removed from the binary outcome of a US dollar move post-Fed.

 

  Yesterday we noted EUR/AUD was trying to form a base and yesterday’s bullish close solidifies this stance. Its pullback from the December high has found support at the 50-day eMA, monthly pivot point, 61.8% Fibonacci level and November 10^th high. A morning star reversal formed at this area and yesterday saw a slight close ahead of the 200-day eMA. Our bias is bullish above this week’s low and for a move to 1.6000 as an initial target, upon which we’d like to see prices hold above the 200-day eMA.

Potential triangle breakout on DXY

We discussed a potential triangle breakout in yesterday’s video, which went on to close the day above the upper trendline. If successful the pattern projects an initial upside target at 97.80. From here we’d want to see DXY hold above 96, and of course a likely trigger for a bullish breakout today is for the Fed to deliver an adequate increase to their tapering and hint at hikes earlier in 2022.

Gold on cusp of a bear-flag breakout?

Gold traded in a minute range overnight, just above yesterday’s 7-day low. There’s no evidence at buyers at these levels and it almost feels like bears are waiting to jump aboard. As a potential setup we think the market has topped at 1793 and gold could be on the cusp of a bear-flag breakout. yet what makes it tricky for bears on a reward/risk basis is how close we are to the November low at 1758. Perhaps it can make an initial target but we’d really want to see a decent break or daily close beneath 1758 before becoming more confidence of a bear flag breakout.

 

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