Technical Analyst, Saxo Bank
Summary: AEX25 and CAC40 cannot break and is ripe for a correction.
BEL20 correction seems to be ongoing and could be leading the way for AEX and CAC
AEX 25 is range bound between 756 and 735. Top and reversal pattern in the form of a Shooting star is in place for a correction but if AEX closes above 756 the uptrend is extended to around 772 resistance.
If closing below 735 a sell-off down to around 725 could be seen.
BEL 20 correction is ongoing. BEL 20 currently testing 0.382 correction, could be the Canary in the coal mine predicting a correction in the other markets. BEL 20 seems to be headed for support at around 3,766 and the 0.618 retracement. 55 daily SMA currently around that level will provide support.
CAC 40 is testing strong resistance at around 7,115. Despite performing a higher close CAC has been rejected three times and is showing divergence on RSI strongly indicating top and reversal.
If CAC 40 closes below 6,946 the Index could drop to 6,840-6,750 area.
If on the other hand CAC 40 can close above 7,118 the uptrend is extended there is no strong resistance until all-time highs at around 7,384. But the uptrend is quite stretched and correction is in the cards.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.