Despite the continued selling in Japan overnight, equity markets in Europe have bounced back from yesterday’s losses, but not being able to hold onto a rally has been very common recently. Janet Yellen is due to testify in front of Congress at 3pm, and Ms Yellen will have the difficult task of being optimistic enough to encourage buyers – without being so hawkish it spooks the markets. If the Federal Reserve chair is overly dovish it could be construed as being too fearful which would spur on the bears.
While the FTSE 100 is above 5600, the outlook will be positive, and 5740 will be a barrier to an upward move. The 8900 region is acting as support for the DAX and 9225 is the next major resistance level on the horizon. The S&P 500 is pointing to a positive start and a move above 1872 would suggest the bulls are in control.
The dollar is fractionally stronger today but traders will be cautious ahead of Ms Yellen’s testimony later. EUR/USD’s strong start to 2016 continues and buy-the-dip has been a popular strategy. Yesterday the currency pair printed its highest level since late October 2015 and today’s pullback may entice buyers.
Gold has taken a small break from its rally but the upward remains intact and while it holds above the support at $1183 a retesting of $1200 can’t be ruled out. Since the big push higher on 4 February oil has been driving lower and while WTI is under $30 and Brent crude is sub-$32 their outlooks will be bearish.