European Open: GBP’s rally stalls at a technical juncture

The strong rally on GBP/USD has paused for breath at two key levels of resistance, leaving us to question whether it’s time to retrace of simply break higher from here.

Charts (5)

Asian Indices:

  • Australia's ASX 200 index fell by -57 points (-0.77%) and currently trades at 7,390.10
  • Japan's Nikkei 225 index has fallen by -263.72 points (-0.93%) and currently trades at 28,214.84
  • Hong Kong's Hang Seng index has risen by 25.48 points (0.11%) and currently trades at 23,772.02
  • China's A50 Index has fallen by -72.45 points (-0.47%) and currently trades at 15,373.75

UK and Europe:

  • UK's FTSE 100 futures are currently up 25.5 points (0.34%), the cash market is currently estimated to open at 7,470.75
  • Euro STOXX 50 futures are currently up 24.5 points (0.58%), the cash market is currently estimated to open at 4,264.02
  • Germany's DAX futures are currently up 71 points (0.45%), the cash market is currently estimated to open at 15,839.27

US Futures:

  • DJI futures are currently down -10 points (-0.03%)
  • S&P 500 futures are currently down -4.75 points (-0.03%)
  • Nasdaq 100 futures are currently down -1 points (-0.02%)
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With no economic data out from Europe today and US inflation data scheduled for tomorrow, volatility may be on the lower side and markets could remain in holding patterns. That is, of course, assuming Jerome Powell doesn’t provide a volatility trigger today when he speaks at 15:00. But we cannot help but notice the importance of the levels GBP/USD is hanging around, as it is clearly a pivotal area.

Cable’s short-covering rally has stalled at the June trendline and 200-day eMA. Such levels don’t tend to break upon their first attempt and a strong CPI print from the US could send cable lower from current levels. In which case we’d have a countertrend target at 1.3500 and 1.3455 (38.2% Fibonacci level) as part of a natural retracement. Alternatively, we’d be interested in a break above yesterday’s high (and ideally close above trendline) to assume a resumption of its bullish leg. 20220111gbpusdCI

WTI holds steady ahead of today’s API report

WTI didn’t hold above $79 for long yesterday before retracing further and invalidating the lower bullish trendline of its 4-hour channel. Yet prices have remained above the 38.2% Fibonacci retracement around $78, and its correction from last week’s high may be forming a bullish wedge pattern. Take note of the weekly API report at 21:30 and headlines surrounding Libya, as they could easily make their mark on oil prices today.

Gold pops above 1800 during quiet trade

Gold has printed a solid bullish engulfing candle yesterday although, as 1800 had capped as resistance, we thought it may have traded in a quiet range overnight. It didn’t. Instead, prices have now broken higher and now trade above the weekly and monthly pivot. Therefore the 1800 – 1804 zone remains a pivotal level today, and if support can be built around it perhaps it could be headed for 1820. Alternatively, a break below it warns of an overnight bull-trap.

FTSE 350: Market Internals

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FTSE 350: 4242.3 (-0.53%) 10 January 2022

  • 81 (23.01%) stocks advanced and 270 (76.70%) declined
  • 15 stocks rose to a new 52-week high, 11 fell to new lows
  • 48.58% of stocks closed above their 200-day average
  • 52.84% of stocks closed above their 50-day average
  • 26.14% of stocks closed above their 20-day average

Outperformers:

  • + 8.03% - Cineworld Group PLC (CINE.L)
  • + 4.13% - TP ICAP Group PLC (TCAPI.L)
  • + 3.13% - Plus500 Ltd (PLUSP.L)

Underperformers:

  • -7.26% - Moonpig Group PLC (MOONM.L)
  • -6.94% - Watches of Switzerland Group PLC (WOSG.L)
  • -6.54% - Spirax-Sarco Engineering PLC (SPX.L)

 

Up Next (Times in GMT)

There’s no economic data scheduled for today’s European session, before business optimism, mortgage data and the weekly API report for energy traders takes over for the US session. Christine Lagarde is speaking at 10:20 GMT, although it is not expected to be regarding policy. Then at 14:30 the Fed’s Esther George speaks on the economic and monetary policy outlook, then Jerome Powell testifies before the Senate Banking Committee at 15:00.

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