After the initial breakthrough on truce in the trade wars, the U.S. and Chinese indices had lost momentum, and today are performing a moderate decline. On Tuesday morning, S&P 500 Futures are around the 2775, cutting 1.8% gains from Friday down to 0.4%. Shanghai’s China A50 is 1% below peak levels at the start of the Monday’s session.
The Initial optimism is slowly dissipating, and markets are await for the further signals. Today no important data publications are expected, so, players' attention will switch to technical analysis.
It is interesting that the rebound in stocks on American exchanges was led by fast-growing IT-companies (FAANG), which underwent the most serious corrections in October and November. That may be a signal for a full return of risk appetite from the market participants.
Despite the impressive increase in heavyweights, such as Apple (NASDAQ:AAPL) (+3.5%) and Amazon (NASDAQ:AMZN) (4.9%), S&P 500 yesterday failed to develop its rebound above the previous local highs. The growth of the index above the 2815 level has fast reversed to decline, which could be a harbinger of a new index drawdown to the October-November lows. The Sell signal, according to the technical analysis, can additionally strengthen the S&P500 below 2660 by the end of the day. In this case, we will see the return under the key levels of 200- and 50-day averages, and the so-called “Death Cross”, when MA (50) crosses the MA (200) line from top to bottom.
An equally interesting situation in the GBP/USD pair. In the previous three months, its rebounds were lower: 1.33, 1.3250, 1.3170. Then it has returned to support at 1.27, from where the pair rebounded in August and November. Also, this level was an important watershed in 2017, which increases its importance. Falling under this mark can start the movement up to 1.20: local lows after Brexit. Keeping the above can be seen as a signal that investors believe in smoothly Brexit. The pair’s behavior near the key level can be influenced by the Bank of England Governor Mark Carney’s speech at the Special Treasury Committee about the UK independence.
Alexander Kuptsikevich, the FxPro analyst