- August 19, 2021
- Posted by: Range Markets
- Category: Technical Analysis
GLOBAL STOCKS SINK AS DELTA VARIANT AND FED TAPER FEARS
It was a sea of red in London and the rest of Europe as fears of the Delta variant continued. In London, the FTSE 100 index declined by more than 1.50%, with most stocks in the index being in the red. In Paris, the CAC 40 index declined by more than 2.45%, with luxury stocks leading the gains. This happened after China President Xi Jinping hinted of a wealth redistribution in the country. This hurt luxury brands like LVMH and Hermes, which do a lot of business in China. Elsewhere, in Germany, all constituents of the DAX index were in the red as it tumbled by more than 1%. Other key laggards in Europe were mining and oil and gas companies, which could be affected as the Delta variant spreads.
The steep sell-off of the GBPUSD pair continued today as investors rushed to the safety of the US dollar. The dollar index, which tracks the performance of the greenback against key currencies, rose to the highest level in more than 9 months. The British pound also declined after data showed that the UK consumer price index was easing. The headline inflation declined to 2.0% year on year in June while the core CPI moved below the Bank of England’s target at 1.9%. These numbers mean that the bank will not be in a hurry to tighten monetary conditions.
US stock futures declined after the Federal Reserve minutes showed that more Fed officials were starting to talk about tapering of asset purchases. The minutes came on the same day that Fed’s Eric Rosengreen said that the Fed should start tapering later this year. He also urged Congress to remove some of its fiscal support. In most cases, tighter market conditions tend to be bearish for equities. Meanwhile, the wave of mergers and acquisitions is going on. In a statement, Goldman Sachs said that it will acquire NN Group in a $1.9 billion deal. In another report, CME Group denied that it was seeking to acquire CBOE.
The FTSE 100 index tumbled to £6,985, which was substantially lower than this month’s high of £7,225. On the four-hour chart, the pair managed to move below the 25-day and 15-day exponential moving averages while the MACD and DeMarker indicators have dropped substantially. The index also declined below the neckline of the descending double-top pattern at £7,090. Therefore, the index will likely have a brief relief rally as bulls attempt to retest that neckline and then resume the downward trend.
The EURUSD hovered at the lowest level since November last year as the risk-off sentiment continued. The pair is trading at 1.1695, which is slightly above this week’s low of 1.1665. On the hourly chart, the pair is at the same level as the 25-period and 15-period moving averages. It is also along the middle line of the Bollinger Bands while the Relative Strength Index (RSI) has emerged from the oversold level. The pair will likely remain in the current range during the American session.
The Dow Jones futures declined sharply as fears of a hawkish Federal Reserve became real. The index declined to a multi-week low of $34,523. On the daily chart, it tested the rising trendline that connects the lowest levels since January 15. It also moved close to the 25-day moving average while the Relative Strength Index (RSI) has declined to 42. The index will likely bounce back as investors target the all-time high at $35,200.