FTSE, EUR/USD Forecast :Two trades to watch

Fiona Cincotta
By :  ,  Senior Market Analyst

FTSE falls with China’s National People's Congress, & the UK Budget in focus

  • FTSE struggles despite a strong close on Wall Street
  • China’s National People’s Congress could influence miners
  • FTSE falls away from 7700

The FTSE is opening lower despite a strong close on Wall Street on Friday and Japanese stocks charging higher, with the Nikkei breaching the key 40,000 level for the first time.

Last week, the Nikkei was the top-performing index, rising over 2% across the five days as it capitalized on growing demand for AI and tech stocks.

The FTSE is proving to be a bit of a damp squib next to its European peers, such as the DAX, which rallied to fresh all-time highs last week. The FTSE’s lack of exposure to AI stocks and technology companies is proving to be its downfall and could see the index struggle to break out of its lackluster showing in recent years.

 The UK budget is due this week but is not expected to bear a strong influence on the UK index, although specific sectors, such as housebuilders, maybe more in focus.

The key event for China this week is the National People's Congress, which could also impact resource stocks and the heavy-weight miners on the FTSE. The focus will be whether Beijing is prepared to add more economic stimulus to boost growth. Meanwhile, China's growth target could also explain how aggressively China wants to pursue an economic recovery.

FTSE forecast – technical analysis

The FTSE has recovered from last week’s low of 7600 but failed to retake 7710, the early February high, and the level buyers need to beat to rise towards 7750 and 7770, the 2024 high. Support can be seen at 7660, Friday’s low ahead of 7=7640 the 50 SMA before 7600 come back into focus.

ftse forecast chart

EUR/USD holds onto last week’s gains ahead of the ECB rate decision this week

  • ECB expected to leave rates unchanged
  • US Fed Chair Powell testifies & NFP report due
  • EUR/USD trades in a holding pattern

EUR/USD is holding steady at the start of what is set to be a busy week for the pair, with the ECB interest rate decision as well as Federal Reserve chair Jerome Powell testifying before Congress and the US non-farm payroll on Friday.

EUR/USD is holding on to gains from last week as investors continue to speculate over when the US Federal Reserve and the European Central Bank could start cutting interest rates.

ECB officials reiterated last week that any discussions surrounding rate cuts were premature even though inflation cooled to 2.6%; business activity data showed a continued contraction, but unemployment fell amid ongoing signs of tightness in the labor market.

ECB president Christine Lagarde has highlighted concerns about a tight labor market that could increase the region's inflationary pressures.

All eyes are on the ECB rate decision on Thursday, where the central bank is expected to leave interest rates unchanged but could give additional clues over the timing of its first rate cut.

Meanwhile, the US dollar is experiencing minor weakness at the start of the week, extending losses from Friday after softer-than-expected manufacturing ISM data. However, losses could be limited on bets the US would avoid a recession, and Federal Reserve officials insist that there is no rush to start cutting interest rates.

Looking ahead, there's plenty of data for US traders to sink their teeth into, as well as Fed chair Jerome Powell testifying before Congress on a biannual event. This will then be followed by the US nonfarm payroll report on Friday, where another robust showing in the labor market could support the view that rates were around high for longer.

EUR/USD forecast – technical analysis

After breaking out of the falling channel, EUR/USD has traded in a tight range around the 200 SMA and capped on the upside by 1.0860 last week’s high and 1.08 on the downside. The RSI is neutral.

A break-out trade could see buyers rise above 1.0860 to test 1.09 resistance, the February high before 1.10, and the psychological level comes into focus.

Conversely, sellers could look for a break below 1.08 to extend losses towards 1.07, the 2024 low.

eur/usd forecast chart


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