All eyes on the Fed for FTSE 100, DAX 40, and S&P 500
Outlook on FTSE 100, DAX 40, and S&P 500 ahead of Fed rate announcement.
FTSE 100 slide nears early September low
The FTSE 100 is trading dangerously close to its 7,131 early September low ahead of Wednesday’s Federal Open Market Committee (FOMC) rate announcement.
Another 75-basis point rate (bps) hike is in the offing, but some market analysts expect as much as 100-basis points.
From a technical analysis perspective, since an Elliott wave A, B, and C zigzag correction ended at its 7,515 mid-September high, the 7,131 low is expected to soon give way with the June and July lows at 7,006 to 6,966 being eyed.
Short-term the FTSE 100 continues to hold along the breached one-month resistance line, now because of inverse polarity support line, which today comes in at 7,144, and also gets support from its two-year uptrend line at 7,183.
Minor resistance is seen around the 7,250 mark but while the next higher 6 September and Tuesday’s high as well as the 55-day simple moving average (SMA) at 7,324 to 7,347 cap, downside pressure should be maintained.
DAX remains under pressure ahead of Fed rate hike
The DAX 40’s swift sell-off from last Tuesday’s 13,570 high amid higher-than-expected US inflation pushed the index to near three-month lows ahead of Wednesday’s Fed rate announcement.
Not only will the size of the rate hike, whether 75- or 100-basis points, be closely watched but also the Fed’s forecast which matters most.
The index formed another bearish reversal candle, a Bearish Engulfing Day, on Tuesday and is now slipping towards its July lows between 12,432 and 12,386 as Russian president Putin signals the annexation of parts of Ukraine by supporting decisions made on “referendums” in Russian occupied territories.
A fall through the July trough at 12,386 would engage the 50% retracement of the pandemic bull market at 12,130. Minor resistance above the early September low at 12,596 can be spotted at the 12,706 August low.
S&P 500 bearish ahead of FOMC rate announcement
The S&P 500 continues its near 7.5% slide from its 4,155 mid-September high towards its July low at 3,720 ahead of the Fed’s rate announcement amid fears that it will need to pursue a more aggressive tightening policy to combat inflation and thus push the US economy into a recession.
Another potential downside target is the 3,636 June low.
While the index remains below this week’s high at 3,918 on a daily chart closing basis, immediate downside pressure should remain in play.
Minor resistance below this level can be spotted around the early September low at 3,884.
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