THE LONDON OPEN 14-10-2022

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THE LONDON OPEN 14-10-2022

EUROPEAN EQUITIES OPENED HIGHER AFTER A POSITIVE ASIAN SESSION; US INFLATION DATA CAME IN HIGHER THAN EXPECTED BUT STARTED TO SHOW AN APPARENT DOWNTREND WHILE GLOBAL MARKETS REBOUNDED.

European equities started well on this last day of the week after a very positive Asian session, where the ChinaA50 index gained 2.65%, the ASX200 1.75% and the Nikkei 3.38%. These substantial gains came on the heels of the US session, where after six consecutive days of declines, the major indices posted their most significant rise since October 4th. The movement might seem counterintuitive, as the US inflation data were once again slightly higher than expected, and thus a bearish market reaction was expected as from the latest readings. There was indeed a bearish reaction, but once prices had recovered their lows, the rise was really significant. This type of movement was created mainly for two reasons: the first is that although the data was better than expected, the US inflation trend has been declining since the June peak, and investors are beginning to think that the worst is behind them; the second is that after six consecutive days of declines, many of those who were positioned short went to target around the lows and began to cover their position, causing the price to rise. Lastly, not to be forgotten are the probable stops (and therefore still forced purchases) of all those who traded the breakout of the lows, who, as soon as the price recovered, began to exit the market at breakeven or a slight loss, in turn contributing to the market’s rise. Although this reaction is to be confirmed next week, the stock market may likely begin a significant retracement to the upside before possibly going down again.

Elsewhere, the FX market also saw the same reaction, with the dollar initially adding to gains (touching the September 29th high) before closing negative; finally, the JPY moved up a few pips to break its lows since August 1998 and is now trading at levels not seen since 1990. The primary commodities also benefited from the drop in the greenback.

As for the macroeconomic calendar, investors will focus on inflation data from various European countries in the morning, while in the afternoon, the focus will be on US retail sales.

EURUSD, M15

The EURUSD rose strongly, posting a similar movement compared to stock indices. Currently, it is trading around the most significant intraday resistance area, the W-1 POC. In contrast, the most crucial intraday support is between the current weekly VAH and the 0.9743 mark. From a technical point of view, as long as prices remain below the resistance, the most likely scenario is a pullback to the support. On the other hand, if prices break the resistance upward and consolidate above it, a stretch to the W-3 POC is expected.

Main intraday support areas where to look for long trades in case of a bullish candlestick pattern or short trades in case of a bearish candlestick pattern: 0.9743-0.9735, 0.9705.

Main intraday resistances areas where to look for short trades in case of a bearish candlestick pattern or long trades in case of a bullish candlestick pattern: 0.9800, 0.9849.

GBPUSD, M15

The GBPUSD is trading in a tight range between the 1.1296 and the 1.1365 marks. From a technical point of view, the most significant intraday resistance is between the W-1 POC and the W-3 POC, while the main intraday support is the 1.1296 mark. As long as prices remain below the resistance, a drop toward the support is expected. On the flip side, if prices break the resistance upward, a stretch to the W-1 VAH first and the W-3 VAH in extension becomes the most likely scenario.

Main intraday support areas where to look for long trades in case of a bullish candlestick pattern or short trades in case of a bearish candlestick pattern: 1.1296, 1.1151.

Main intraday resistances areas where to look for short trades in case of a bearish candlestick pattern or long trades in case of a bullish candlestick pattern: 1.1325-1.1343, 1.1392, 1.1465.

Key:

POC= Point of Control

VAH= Value Area High

VAL= Value Area Low

LVN= Low Volume Node

HVN= High Volume Node

W-1= last week

W-2= two weeks ago

W-3= three weeks ago

D-1= yesterday

D-2= two days ago

D-3= three days ago

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Source: THE LONDON OPEN 14-10-2022