FTSE 100, DAX 40 and Dow come off Tuesday’s highs ahead of central bank meetings
Outlook on FTSE 100, DAX 40 and Dow ahead of plethora of central bank rate decisions.
FTSE 100 rallies on weaker-than-expected US inflation data
On Tuesday the FTSE 100 revisited but then bounced off its 7,429 to 7,421 support zone, made up of the mid-November high and late November low, as US Consumer Price Inflation (CPI) came in below expectations for the second time in November, at 7.1% year-on-year and 0.1% month-on-month versus an expected 7.3% and 0.3%.
UK inflation also slowed its rise in November, with the headline figure up 10.7% from 11.1% in October, and core CPI up 6.3% compared to 6.5% in the previous month.
While Tuesday’s high at 7,553 caps, the risk remains that the 7,429 to 7,421 mid-November high and late November low at 7,421 will be retested as market participants await rate decisions by the US Federal Reserve (Fed) later on Wednesday, and the European Central Bank (BoE) and Bank of England (BoE) on Thursday.
As long as the 7,421 low underpins on a daily chart closing basis, however, the October-to-December uptrend remains valid. Failure at 7,421 would engage the early November high at 7,378 whereas a rise above Tuesday’s 7,553 high would target the 7,618 late November peak.
DAX 40 briefly trades in six-month highs post-US inflation data before levelling out
The Dax 40 briefly rallied to a six-month high at 14,677, boosted by Tuesday’s weaker-than-expected US inflation data but then gave back some of its profits ahead of Wednesday’s US Federal Reserve (Fed) and Thursday’s European Central Bank (ECB) rate decisions.
Sideways trading between 14,677 and last week’s low at 14,192 is expected to take place until the end of the week. While 14,192 and the mid-November lows at 14,150 to 14,125 hold on a daily chart closing basis, the index remains medium-term bullish.
Immediate resistance now sits between the recent highs at 14,606 to 14,677 and immediate minor support at the mid-November high at 14,442.
An advance above the 14,677 Tuesday high, currently unexpected due to the negative divergence on the daily RSI, would engage the 14,712 June peak, whereas a slip through 14,442 would eye the 14,325 late November low.
Dow Jones Industrial Average spikes to 8-month high on US inflation data but then retraces
On Tuesday the Dow Jones Industrial Average (Dow) surged all the way to an 8-month high at 34,941 on weaker-than-expected US inflation data before retracing over half of its advance after a second inflation reading in the US showed price growth had moderated slightly and on profit taking ahead of Wednesday’s Federal Open Market Committee (FOMC) rate decision announcement.
Since triple negative divergence can be spotted on the daily Relative Strength Index (RSI), a slide back towards the October-to-December uptrend line at 33,630 may ensue over the coming days. While last week’s low at 33,420 underpins, though, the medium-term two-month uptrend remains in place.
Only failure at 33,420 would indicate that an interim top is being formed and would push the 200-day simple moving average (SMA) at 32,435 to the fore.
Strong resistance can now be spotted at the late November and early December highs at 34,661 to 34,941.
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