European Open: Futures higher, NZD/JPY eyes break of 83 post-RBNZ

Asian Indices:

Australia's ASX 200 index rose by 48.9 points (0.69%) and currently trades at 7,177.70
Japan's Nikkei 225 index has fallen by -3.89 points (-0.01%) and currently trades at 26,743.84
Hong Kong's Hang Seng index has risen by 128.88 points (0.64%) and currently trades at 20,240.98
China's A50 Index has risen by 8.97 points (0.07%) and currently trades at 13,159.66

UK and Europe:

UK's FTSE 100 futures are currently up 70 points (0.94%), the cash market is currently estimated to open at 7,554.35
Euro STOXX 50 futures are currently up 37 points (1.02%), the cash market is currently estimated to open at 3,684.56
Germany's DAX futures are currently up 137 points (0.98%), the cash market is currently estimated to open at 14,056.75

US Futures:

DJI futures are currently up 123 points (0.39%)
S&P 500 futures are currently up 105 points (0.89%)
Nasdaq 100 futures are currently up 23 points (0.58%)

Futures markets are higher against overnight for US and European markets. We saw the same thing yesterday, only for Wall Street to fall after the open – so we’ll keep that in mind before assuming any sort of rally today.

RBNZ hikes rates by 50-bps – a move which was widely expected. But the element of surprise came within their upwardly revised OCR forecast. Their statement was titled “Monetary conditions tighten by more and sooner” and their OCR is now projected to rise to 3.9% by September 2023, compared to 2.75% by April 2024 back in February.

Still, these are not entirely happy hikes as they’re aimed at taming inflation. Retail sales contracted in Q1 – and we’re yet to see the effects from the 100-bps hikes seen so far in Q2. Business PMI contracted in once again in April, the fourth industry contraction in five. And whilst the NBNZ business outlook showed a mild rebound in April, it remains near levels of pessimism not seen since Q1 2020.

NZD/JPY considers a break above 83

Regardless, the wider interest differentials (in the favour of NZD) are now being priced in, which has sent EUR/NZD beneath yesterday’s low and invalidated out bullish bias. GBP/NZD has fallen to a 12-day low and ZD/USD has reclaimed 65c again.

We’re now keeping a potential eye on a breakout on NZD/JPY. Clearly it will stand a better chance during a bout of risk-on as the yen is susceptible to safe-haven flows. But its retracement from the April high found support around the 200-day eMA and 61.8% Fibonacci ratio. Yesterday’s low held above the 50%, and a break above 83 clears the 38.8% ratio, 50 and 20-day eMA’s and takes prices to a new cycle high.

FTSE: Market Internals

FTSE 350: 4160.97 (-0.39%) 24 May 2022

66 (18.86%) stocks advanced and 275 (78.57%) declined
3 stocks rose to a new 52-week high, 7 fell to new lows
26.29% of stocks closed above their 200-day average
50.29% of stocks closed above their 50-day average
19.43% of stocks closed above their 20-day average

Outperformers:

+ 3.57% - HSBC Holdings PLC (HSBA.L)
+ 3.52% - SSP Group PLC (SSPG.L)
+ 3.20% - Barclays PLC (BARC.L)

Underperformers:

-13.79% - Drax Group PLC (DRX.L)
-9.30% - WPP PLC (WPP.L)
-8.48% - Carnival PLC (CCL.L)

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