Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Wall Street Rebounds, European Morale Stays Subdued

By JFD TeamMarket OverviewNov 25, 2021 04:14AM ET
Wall Street Rebounds, European Morale Stays Subdued
By JFD Team   |  Nov 25, 2021 04:14AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The US dollar continued to gain yesterday, perhaps due to increasing expectations over a quicker removal of monetary policy stimulus by the Fed. Still, equities rebounded, suggesting that stock investors may have already digested the idea of higher rates.

In Europe, though, the picture was different, with appetite staying soft due to the new COVID-related restrictions around the continent. Today, we will get to hear from European Central Bank (ECB) President Lagarde and BoE Governor Bailey, whose remarks could shape market expectations around the future policy path of their Banks.

Most European Indices Continue to Slide, Wall Street Trades in the Green

The US dollar continued to drift north against most other major currencies on Wednesday and during the Asian session Thursday. It underperformed only versus CAD, while it was found virtually unchanged against CHF. The greenback gained the most versus NZD and JPY.

USD performance vs. major currencies.
USD performance vs. major currencies.

The strengthening of the greenback and the safe-haven franc, combined with the weakening of the risk-linked Kiwi, suggests that financial markets may have traded in a risk-off fashion once again. However, the strengthening of the Loonie and the weakening of the yen point otherwise.

Therefore, to get a clearer picture regarding the overall investor morale, we prefer to turn our gaze to the equity world. There, most of the major EU indices under our radar were lower or unchanged.

The only gainer was Italy's FTSE MIB, due to Telecom Italia (MI:TLIT) taking another shot in the arm, surging 15.6%, following reports that KKR is considering boosting its offer for the company.

Later in the day, sentiment improved in Wall Street, with the S&P 500 and NASDAQ trading in buoyant waters and Dow Jones Industrial Average staying near its opening levels. Today in Asia, the picture was more mixed.

Major global stock indices performance.
Major global stock indices performance.

Yesterday, we expected the US indices to rebound and trade higher soon, despite increasing expectations over a quicker removal of monetary stimulus by the Fed. In our view, most investors have already digested that idea, convinced by recent comments from several Fed policymakers, as well as by the reappointment of Jerome Powell as the Fed Chief.

This is also evident by the fact that the S&P 500, and especially NASDAQ, gained, despite the minutes of the latest FOMC meeting, revealing that officials have been considering a faster tapering pace and sooner rate hikes since then. 

Thus, we stick to our guns that the US dollar may stay strong when investors are willing to buy stocks, conditional upon economic data confirming the resilience of the US economy.

Now, in Europe, the picture is not so bright. We believe that equities here may stay under pressure for a while more, and this may be due to increasing COVID cases and the imposition of new restrictive measures. 

As we noted yesterday, although the flash PMIs for November surprised the upside, suggesting that the Euro-area economy has not been affected by the latest supply shortages as many may have believed, the new pandemic-related measures keep concerns over the future performance of the economy elevated.

Even the German Ifo survey said that business morale deteriorated for the fifth straight month in November, highlighting investors' anxiety even before the imposition of new restrictions.

What's more, expectations over a sooner rate increase and a faster rate path by the Fed raised speculation that the ECB may also raise rates sooner, with participants fully pricing in such a move next year.

However, with the risk of further economic slowdown in the Eurozone, we don't believe that ECB officials will dare to think of something like that. Today, we will get to hear from President Lagarde, and we expect her to reiterate the view that raising interest rates now to rein in inflation could choke off the Eurozone's recovery.

We expect the minutes from the latest ECB meeting, due out an hour ahead of Lagarde's speech, to deliver the same message. This is likely to keep the EUR pressured, especially against the US dollar, as well as against the GBP.

GBP traders have raised bets that the Bank of England (BoE) could hit the hike button next month after Governor Andrew Bailey said that they are still on a path towards raising interest rates, and after the latest CPIs accelerated by more than expected. Governor Bailey will speak today as well, and another round of hawkish remarks could encourage some more pound buying.

EURO STOXX 50 – Technical Outlook

The Euro Stoxx 50 cash index traded lower yesterday but hit support at 4240, and later in the day, it rebounded. Overall the index has been in a sliding mode since Nov. 18, when it hit resistance at 4415, while the next day, it fell below the upside support line drawn from the low of Oct. 6. With that in mind, we will consider the short-term outlook to be negative.

We believe that, even if the latest rebound continues for a while more, the bears may retake charge from near the 4310 zone and push the action back down for another test near yesterday's low of 4240. A break of that barrier will confirm a forthcoming lower low and extend the fall towards the low of Oct. 29, at 4185.

To abandon the bearish case, we would like to see the recovery extending above the high of Nov. 23, at 4327. This may not signal that the prior uptrend is back in force, but it may result in some short-term advances. First, we could see investors targeting the high of Nov. 22, at 4372, the break of which could extend the advance towards the high of Nov. 18, at around 4415.

Euro Stoxx 50 cash index 4-hour chart technical analysis.
Euro Stoxx 50 cash index 4-hour chart technical analysis.

EUR/GBP – Technical Outlook

EUR/GBP has been trading in a sideways manner since Nov. 17, between the 0.8380 and 0.8430 barriers. However, bearing in mind the fundamentals, as well as that the prevailing longer-term path has been to the downside, we would see more chances for the rate to exit the range to the downside rather than to the upside.

An apparent dip below 0.8380 would confirm a forthcoming lower low and may see scope for declines towards the low of Feb. 25, 2020, at around 0.8335. IF that level cannot stop the fall, then we could experience extensions towards the 0.8294 zone, which prevented the rate from falling lower back on December 12th and 13th, 2019, as well as between Feb 13 and 18, 2020.

On the upside, we would like to see a break above the upper bound of the range, as mentioned earlier, before we start examining whether the bulls have gained the upper hand. This could result in advances towards the inside swing low of Nov. 15, at 0.8462, the break of which could target the high of that day at 0.8483.

EUR/GBP 4-hour chart technical analysis.
EUR/GBP 4-hour chart technical analysis.

As for the Rest of Today's Events

Besides the ECB minutes and the speeches from ECB President Lagarde and BoE Governor Bailey, we will also get to hear from ECB’s Elderson and Schnabel, as well as by BoE MPC member Haskel. Otherwise, the calendar is very light, with Wall Street set to stay closed to celebrate Thanksgiving Day.

Wall Street Rebounds, European Morale Stays Subdued

Related Articles

Wall Street Rebounds, European Morale Stays Subdued

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email