CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Levels to watch: FTSE, DAX and CAC

European indices gain ground amid recent downtrends, but there could be more left in the tank for further downside.

IG Analyst

Publication date : 2017-07-04T09:29:36+0100

Trader

Source: Bloomberg

FTSE could have further downside to come

The FTSE is seeing weakness once more this morning, coming off the back of a rally into the crucial 7381 resistance level. Given the break below that level last week, we are likely to sell off into a deeper retracement of the rally from 7088, with the 61.8% (7284) and 76.4% (7209) levels of particular interest.

As such, further downside from here looks likely from here, with a break through 7450 required to negate the recent downtrend.

FTSE chart

FTSE chart

FTSE chart

DAX weakening from key resistance

The DAX has been turning lower from the crucial 12,490 double top neckline overnight, with that break providing us with a bearish outlook. As the index starts to turn higher from 61.8%, there is a chance we could see another test of the key 12,490 resistance level. A break back above that level would point towards a retracement of last Thursday’s sharp sell-off.

However, the lack of any near-term swing high means it would take a break back above 12,735 to bring us back into a bullish mindset. With that in mind, it makes sense to look for longs at the 61.8%, 70% or 76.4% pullback (12,327, 12,245 or 12,180). Given the bullish divergence we are seeing with the stochastic, which has not broken to a new higher high, there is reason to believe that while we could see further downside come into play, it will provide a buying opportunity. Ultimately, we would need to see a break back below 11,941 to believe that the recent downtrend is going to be a more longstanding issue.

DAX chart

DAX chart

DAX chart

CAC rally unlikely to last

The CAC is similarly regaining ground this morning, following a drop into channel support. While there is a good chance we could see further upside from here, we would need a break through 5281 to believe this recent downturn is over.

As such, selling into this rally is preferred, with the 70% (5230) and 76.4% (5241) of particular interest for shorts.

CAC chart

CAC chart

CAC chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IG Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by writer

Disclaimer:

All forms of investments carry risks and trading CFDs may not be suitable for everyone. CFDs are leveraged instruments and can result in losses that exceed deposits, so please ensure that you fully understand, and are aware of, the risks and costs involved. Refer to the Risk Disclosure Statement and Risk Fact Sheet.

IG Asia Pte Ltd (Co.Reg.No. 200510021K) is regulated by the Monetary Authority of Singapore and holds a capital markets services licence for dealing in capital markets products that are over-the-counter derivatives contracts and is an exempt financial adviser.

IG provides an execution-only service. The information in this advertisement does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of or solicitation for a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. You should consider your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

The information on this site is not directed at residents of the United States or Belgium and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

This advertisement has not been reviewed by the Monetary Authority of Singapore.