Equities Sink Despite Central Bank Action
Global benchmark equities prices continue to trade wildly amidst a backdrop of increasing central bank action. This week, the Federal Reserve once again announced an unexpected rate cut, dropping the US interest rate by 100 basis points to 0%. Along with the rate cut, the Fed also outlined an increase in its bond purchases which will now rise by a $700 billion in a bid to support businesses and regional banks amidst the crisis.
The Bank of Japan threw its hat into the ring this week also, announcing a 12 trillion Yen increase in its own purchases of exchange-trade fund securities. The BOJ announced it will also be stepping up the target on its commercial paper corporate bond purchases by 2 trillion Yen through to end of September.
Six banks within the G10 space have now taken action in efforts to help support their economies against the aggressive downside impact from COVID-19. As more countries announce lockdown measures and businesses close, sentiment remains very heavy in the markets as investors panic in the face of a potential global recession. To that end, these latest easing announcements have down little to lift the mood in equities markets and asset prices continue to hurtle lower.
Technical Views
DAX (Bearish below 10268.16)
From a technical viewpoint. The sell off in the DAX has seen price breaking all the way down to test the 8687.75 level. Though piercing the level initially, DAX has since found support here. However, any stabilisation is likely to be temporary and the risk of a drop down to the 7459.49 level next is high.
S&P500 (Bearish below 2698.7)
From a technical viewpoint. The S&P sell-off came very close to testing the 2317.1 level support but found bids just ahead of the level at the weekly s1 (2382.4). With VWAP firmly negative, and on the back of a major sell-off, the outlook remains tilted lower here with a test of the 2317.1 level likely next unless price can recover above the yearly S1 (2698.7).
UK100 ( Bearish below 5456.5)
From a technical viewpoint. The FTSE has broken down below the 5456.5 level on the back of recent declines though has yet to test the 4724.8 level. In light of recent price action, a continued move lower looks likely with the index vulnerable to a break of this level unless we see a quick recovery back above the 5456.5 level.
Nikkei (Bearish below 19076.1)
From a technical viewpoint. The Nikkei is now sitting down at the 16170 support, holding just above for now. Having broken below the 19076.1 level support this week, the outlook remains very bearish in the near term. While some consolidation is possible here, unless price reclaims the 19076.1 level soon, a deeper drop down to the 14753.6 level is at risk.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!