European Open: Futures open higher, WTI back above $79

Asian Indices:

• Australia's ASX 200 index fell by -6.8 points (-0.09%) and currently trades at 7,446.50
• Japan's Nikkei 225 index has fallen by -9.34 points (-0.03%) and currently trades at 28,478.56
• Hong Kong's Hang Seng index has risen by 193.72 points (0.82%) and currently trades at 23,687.10
• China's A50 Index has risen by 28.78 points (0.19%) and currently trades at 15,433.33

UK and Europe:

• UK's FTSE 100 futures are currently up 17.5 points (0.24%), the cash market is currently estimated to open at 7,502.78
• Euro STOXX 50 futures are currently up 10.5 points (0.24%), the cash market is currently estimated to open at 4,316.33
• Germany's DAX futures are currently up 25 points (0.16%), the cash market is currently estimated to open at 15,972.74

US Futures:

• DJI futures are currently down -13 points (-0.04%)
• S&P 500 futures are currently up 48.25 points (0.31%)
• Nasdaq 100 futures are currently up 4.25 points (0.09%)

Equity markets were mixed overnight as investors braced for a continuation of inflationary forces and a hawkish Fed. The Hang Seng was a strong performer and trades around 1% higher, the China A50 is up just 0.2% whilst the ASX 200 is -0.1% during quiet trade. Futures markets have opened higher with the FTSE and STOXX 50 up 0.24% and the DAX is up around 0.16%.

WTI shows the potential of a swing low

Oil prices edged higher overnight with to recoup some of Friday’s post-NFP losses. Tensions in Kazakhstan and supply disruptions in Libya remain supportive of oil prices overall, helping WTI futures trade back above $79 during overnight trade.

We can see on the four-hour chart that prices are currently respecting the lower trendline of the bullish channel. A small bullish outside candle has just formed on this timeframe, and the candle provided the third (confirmation) touch of the trendline.

It is therefore possible the market is trying to carve out a swing low, which could be assumed if prices break (and hold above) the 79.30 high before testing the recent low. However, if bulls want to allow for extra wriggle room (volatility) then our bias remains bullish above the weekly pivot point at 77.89.

AUD was the strongest major overnight

Stronger than expected building approvals helped lift AUD against all major peers. Rising 3.6% in December, it recoups some of November’s dire -13.6% print, although one should question if it remains sustainable given the rate of coronavirus cases across Australia. Should hospitalisation rate remain low relative to new daily cases then lockdowns appear unlikely. AUD/USD touched a 2day high and AUD/JPY touched a 3-day high.

USD/CAD could be one to watch for further downside potential. A bearish hammer formed on Thursday ahead of Friday’s sell-off, although support has been found at its 100-day eMA, just above 1.2620 support.

Sterling holds steady

As noted in this week’s COT report, the British pound has seen plenty of short covering these past two weeks although its effect can be better seen on some crosses. GBP/CHF touched 1.25 overnight for the first time since November, and rose to just 25 pips below 1.20 against the euro. Still, commodity FX remains the stronger bet as the GBP is lower against AUD, NZD and CAD.

FTSE 350: Market Internals

Futures markets suggests the FTE 100 could retest 7500 today, which leaves the question as to whether it can close above it and reclaim last week’s high. It’s daily trend since the December low remains firm overall, but bulls need to defend the 7420 low today to avoid triggering another leg lower (in line with Thursday’s bearish engulfing candle).

FTSE 350: 4272.27 (0.47%) 07 January 2022

• 132 (37.50%) stocks advanced and 202 (57.39%) declined
• 13 stocks rose to a new 52-week high, 11 fell to new lows
• 54.83% of stocks closed above their 200-day average
• 58.81% of stocks closed above their 50-day average
• 25.28% of stocks closed above their 20-day average

Outperformers:

• + 6.60% - Aston Martin Lagonda Global Holdings PLC (AML.L)
• + 4.85% - Essentra PLC (ESNT.L)
• + 4.06% - Clarkson PLC (CKN.L)

Underperformers:

• -5.84% - Ninety One PLC (N91.L)
• -3.74% - Kainos Group PLC (KNOS.L)
• -3.58% - Baillie Gifford Shin Nippon PLC (BGS.L)

Up Next (Times in GMT)

There’s no top tier economic data releases in Europe today, and the same can be said for the US session so we may fid it to be a relatively quiet start to the week for currency markets.

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