Brenda Kelly, Head Analyst at London Capital Group, takes a look at the China-Commodity market connection, S&P 500, FTSE 100, EUR/GBP, AUD/USD, and Brent Oil.
Commodities remain a mirror for looking into China performance
Kelly says that the exports and imports data out of China suggest the GDP growth of the economy remains much lower than 7%, and if this is the case, it will have global implications ahead. She further adds that the commodities slump offers a better clue into what’s happening into the Chinese markets, and most of this dip remains demand driven.
No inflation for the Fed to hike rates
Kelly comments on the US jobs data, and the key risk for the USD ahead – Lockhart’s speech. She believes that the Fed member speech will underpin further US strength. On the rate hike, she mentions that the absence of inflation in the US economy will hold back the Fed’s rate hike. The rate hike will also be crucial for the S&P 500 outlook.
FTSE 100 might move lower
Kelly says that China and the commodity picture remains a key risk for the FTSE 100, more than the BoE, but markets also await any news on the rate hike by Carney. Looking at the technical picture, she sees potential for a lower print ahead in the footsie.
EUR/GBP: might see a correction towards 0.7180
A short-squeeze is in the offing for EUR/GBP, according to Kelly, and an upside correction might be seen towards 0.7180, but not above this. On the UK rate hike agenda, she believes that Carney is waiting for the Fed to make the first move in lifting rates from the ‘zero’ level.
AUD/USD: Upside potential
Kelly notes that the 14-year trend line from 2001 to present suggests the direction for the Aussie is tilted downwards versus the Dollar. But, positive data from Australia remains supportive of a corrective bounce ahead in AUD/USD towards 0.7430-0.7480.
Brent: $30 mark not too unrealistic
Kelly predicts a Brent crude oil move towards its previous lows, and believes that the $30 figure might not be too unreasonable. She further adopts a sell on rallies approach for oil prices on a rally towards $50/barrel-$51barrel.