Two trades to watch: FTSE, EUR/USD

FTSE falls after disappointing Chinese data

The FTSE, along with its European peers, is heading lower at the start of the week after a drop of dismal data from China.

Chinese retail sales fell by 11.1% YoY in April, down from -3.5% in March and below the -6% forecast. Industrial output fell -2.9% YoY.

The data highlights the hard economic impact of China’s zero- covid policy and exasperates fears of slowing global growth. The data overshadowed news that some lockdown restrictions were relaxed in Shanghai as cases start to slow. However, restrictions in Beijing are tightening.

To the backdrop of concerns over slowing growth and rising inflation, the BoE will face the Treasury select committee. BoE’s Andrew Bailey can expect a grilling when he takes to the hot seat amid growing criticism of the central bank’s performance.

Where next for the FTSE?

The FTSE has extended its rebound from 7155 but has run into resistance at the 50 & 100 sma around 7450. The long upper wick on the daily candle suggests little appetite at the higher levels, and the index fell back below the moving averages.

Should 7450 hold as resistance, the price could slip back to support at 7360, the May 11 high, with a break below here opening the door to 7300, a level which has offered support and resistance at several points over the past six months. A fall below 7155 is needed to create a lower low.

On the flip side, a move over 7450 could open the door to 7500 May 6 high, head of 7630, and the prospect of fresh post-pandemic highs.

EUR/USD falls ahead of Eurozone economic forecasts

EURUSD is falling at the start of the week, adding to losses from last week. The risk-off market mood is weighing on the euro.

Weaker than forecast Chinese data is raising fears of slowing global growth. Meanwhile, geopolitical tensions remain amid the ongoing Russian war and as Finland and Sweden take a step closer to joining NATO,  a move which would change the security environment in Europe dramatically and which would rile Putin.

German PPI rose to a record high of 23.6% YoY, up from 22.6% in March, but short of the 24% forecast.

Attention now turns to Eurozone economic forecasts, which are due to be released, and which the markets will be watching closely for signs of the impact of the Russian war.

Where next for the EUR/USD?

EURUSD trades below the 50 & 100 SMA on the 4-hour chart and below its multi-week falling trendline.

The pair took out support at 1.0470 last week, falling to a low of 1.0360. The pair is now consolidating capped on the lower side by 1.0360 and on the upper side by 1.0420.

The RSI has moved out of oversold territory but remains bearish below 30.

Sellers will look for a move below 1.0350 to attack the 1.03 round number, with further losses pushing the pair towards 1.0250.

On the flip side, should buyers retake 1.0420, then 1.0470 moves into target. A move above here exposes the 50 sma at 1.0520.

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