EUR/USD, FTSE 100 analysis: European open – 26/09/2023

Asian Indices:

• Australia's ASX 200 index fell by -33.9 points (-0.48%) and currently trades at 7,042.60
• Japan's Nikkei 225 index has fallen by -398.98 points (-0.91%) and currently trades at 32,678.62
• Hong Kong's Hang Seng index has fallen by -149.26 points (-0.84%) and currently trades at 17,580.03
• China's A50 Index has fallen by -88.8 points (-0.71%) and currently trades at 12,485.38

 

UK and Europe indices:

• UK's FTSE 100 futures are currently up 2 points (0.03%), the cash market is currently estimated to open at 7,625.99
• Euro STOXX 50 futures are currently down -8 points (-0.19%), the cash market is currently estimated to open at 4,159.37
• Germany's DAX futures are currently down -12 points (-0.08%), the cash market is currently estimated to open at 15,393.49

 

US Futures:

• DJI futures are currently down -94 points (-0.27%)
• S&P 500 futures are currently down -14 points (-0.32%)
• Nasdaq 100 futures are currently down -58.25 points (-0.39%)

 

 

Events in focus (GMT+1):

• 13:00 – US building permits
• 14:00 – US house price index
• 15:00 – US consumer confidence (Conference Board)

 

 

The Conference board release their consumer sentiment survey at 3pm London, and whilst the August report the expectations index as a “hairline above 80” – a level they use to assume a prediction - the board still suspects that a recession is pending. So it will be interest to see if the consumer reads deteriorate further today to reinforce their view.

Bond market implied volatility is rising according to my colleague David Scutt, with the MOVE index seeing its fastest daily rise in three months on Monday. As noted in the Week Ahead, bond markets and their rise in yields is more likely to direct sentiment this week over economic data. And that means if Wall Street manages to lift itself further from last week’s lows, I suspect it could be a last hurrah ahead of its next leg lower.

Volatile was very low for currency pairs overnight with a lack of market-driving news released across APAC. 1-day implied volatility is also on the low side for most forex majors, although EUR/USD has the highest 1-day IV relative to its 20-day MA of 146%.

Asian equity markets were modestly lower, but we’re keeping an eye on the China A50 to see if it can rebound from the magical 12,400 level once more – a level that keeps coming to the rescue for the struggling index.

 

 

EUR/USD technical analysis (daily chart):

EUR/USD prices finally caved on Monday and broken beneath 1.06 in line with my bias last week. IN all the tie yields rip higher and European data comes in soft, the potential for a lower EUR/USD remains. Especially since large speculators remain net-long EUR/USD futures (although at a 436-week low).

But this is not a new trend, and the risks of a countertrend bounce are growing. But as of yet, there’s no immediate signs of a bottom forming, which means we’d prefer to fade into minor rallies or breaks of support, for a potential move towards the target around 1.050,

 

EUR/USD technical analysis (1-hour chart):

EUR/USD traded in a very narrow range just above Monday’s lows during today’s the Asian session. The fact it failed to retest the low (let along break it) leaves the potential for a bounce higher. But given the volatile and often unfriendly nature of the London Open, we’re equally open to Monday’s low being tested before prices rebound that we are to prices simply bouncing higher after the open.

What has also caught my eye is how prices are holding just below the monthly S2 and weekly S1 pivot levels, which makes me suspect it wans to revert above them – at least temporarily. The upper 1-day implied volatility level sits just beneath the May low, which makes it a potential target for countertrend bulls (or an area of bears to consider fading into). Ultimately, we’re looking for evidence of a swing high to capture an initial move towards the 1.050 target, with 1.0540 also making an interim support level.

 

FTSE 100 technical analysis (daily chart):

The FTSE may have benefited from a weaker British pound and prospects that the Bank of England (BOE) have finished hiking interest rates, but it is now getting caught in the crosswinds of rising bond yields. Its 7.4% rally from the August low to September high failed to produced a daily close above the July high. And when you see several failed attempts to close above a structural level before momentum moves the other way, it can indicate an inflection point.

In this case, the FTSE saw four failed attempts to close above 7725 before momentum turned lower and closed just beneath the 200-day MA on Monday. Prices have edged lower during the Asian session, and area of interest for bears to consider fading into include the 200-day MA at 7646 or Monday’s high at 7685.

An initial target could be the 7531.6 open price, with a break beneath 7500 bringing the 7368.3 low into focus.

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge