Global equities are on the rise and no where seems to be bucking the trend as of late. Lately with rates remaining so low and the outlook looking dovish the markets have been chasing yield, and with bond markets at record lows and offering nothing substantial, equity markets are looking to take full control. The FTSE 100 has certainly been one of those markets where even though the outcome has been somewhat dire for the economy, the stock market continues to find bullish pressure as the recent rate cut has put the spotlight back on equity returns. Record highs of an equity market are for the most part not an indicator of an economies health, but instead a case of cheap capital looking for a home in a market where yield is and will continue to be everything.
On the charts the FTSE is looking quite strong, but the correlation between movements with global equity markets is quite obvious, so it’s clear that global impacts do have a far reach on the FTSE 100. Key things to watch with the FTSE 100 so far is the 20 day moving average, as the market has pushed down to it before and it has held up any further lower lows. So from a technical standpoint it has been looking quite strong and may remain so in the near future. Resistance also looks to be forming around 6817 and previously we have seen the market treat this level like a ceiling for some time when it comes to previous record highs. Support levels on the way down can be found at 6727 and 6626, with the later being the strongest level before the 20 day moving average; which is likely to catch any falls in the short term.
The Canadian economy has so far been a mixed bag but has managed to claw back some ground against the USD on the charts. Early results in the weak showed building permits m/m slowing down and coming in at -5.5% (1.5% previous), this was a much weaker response than the previous reading and shows that despite the recent rebound in oil there may still be some worry in the market. Even the current government stimulus programme may take some time to filter down into the economy in the short to medium term. Housing starts 198K were a little better and this has provided support the Canadian economy. However, at the end of the day oil prices will continue to be key for movements in the USDCAD as the correlation still remains strong.
For the USDCAD it has so far managed to get held up on the 20 day moving average when trying to push lower and claw back some ground. The bears are looking to make some ground, but the overall long term trend has been bullish in the medium to long term. Any further lower lows are likely to snag on the trend line that formed on the 16th of June that is bullish, a push through will likely find support at 1.3017.