European Open: Reality Check for Risk as China Data Misses

Indices from Asia:

The ASX 200 index in Australia increased by 18.3 points (0.26 percent) to 7,093.40.

The Nikkei 225 index in Japan has gained 167.78 points (0.63 percent) and now trades at 26,595.43.

The Hang Seng index in Hong Kong has dropped 73.65 points (0.37%) and is now trading at 19,825.12.

China's A50 Index is presently trading at 13,144.84, down -151.19 points (-1.14 percent).

UK and Europe: FTSE 100 futures in the UK are now down -25 points (-0.34%), with the cash market expected to open at 7,393.15 points.

Futures on the Euro STOXX 50 are now down -13 points (-0.35%), with the cash market expected to open at 3,690.42.

The DAX futures in Germany are now down -40 points (-0.29%), with the cash market expected to open at 13,987.93.

Futures in the United States are now down -128 points (-0.4 percent )

Futures on the S&P 500 are now down 69 points (-0.56 percent )

Futures for the Nasdaq 100 are now down -21 points (-0.52 percent )

Form of data To say the least, China today was unimpressive. Because of the lockdowns, we knew it wouldn't be wonderful, yet retail sales, industrial production, output, and investment all fell in lockstep, while the unemployment rate climbed. This dampened mood in the area, with copper reversing early gains and Chinese shares, as well as the AUD/JPY and US futures, trading down.

The fact that there is a light at the end of the tunnel for lockdowns has helped to lessen the pain. Shanghai declared over the weekend that restaurants, stores, and shopping centers will be allowed to return today, and then disclosed that the goal date for reopening is June 1st.

Commodity currencies were once again lower, continuing a trend that began last week. The yen stepped up to the safe-haven plate and even outperformed the US dollar, with USD/JPY shattering a major hourly trendline.

While prices hit resistance around the 100-hour eMA, a bearish divergence emerged on the stochastic oscillator, and the trendline break revealed a rising wedge pattern is in action, targeting the lows at 127.50. For the time being, we'd like to fade into weakness below the 129.50 resistance zone, with the 128.30 support zone serving as a stop-loss.

On Friday, the FTSE 100 had its best day in two months as risk assets rallied ahead of the weekend. It started at the day's low and finished slightly below its 20-day eMA, just off the high.

Despite the day's gloomy end, the stochastic oscillator issued a buy signal on Wednesday. However, a false breach of 7200 on that day signified a swing low ahead of Friday's rebound, which saw it close above the 200-day eMA as well.

We'd like to look for dips inside Friday's range from here, particularly if prices can stay above the 7340–7350 support zone. If that's the case, 7500 is a good intermediate goal before 7600, while a break (or hourly close) below the 200-day eMA at 7269 invalidates our bullish stance.