FTSE 100 and DAX 40 rally on lower-than-expected inflation data while Dow looks subdued
Outlook on FTSE 100, DAX 40 and Dow Jones Industrial Average ahead of US Fed minutes.
FTSE 100 rallies on improving risk sentiment
The FTSE 100, which was the best performing major equity index in 2022 and managed to end 2022 on a slightly positive note, remains bid on hopes that China’s swift re-opening could lead to a faster recovery in the world’s second largest economy and thus buoy global demand.
The index is heading up towards its November, December and Tuesday’s highs at 7,616 to 7,625 which constitute a significant resistance zone.
A rise and daily chart close above the current January high at 7,625 would lead to the February-to-May 2022 highs at 7,649 to 7,688 being in focus. This even more important resistance zone is expected to cap, though.
Immediate support comes in between the 7,553 to 7,541 13, 22 and 28 December highs, ahead of the breached 2022-to-2023 two-month resistance, now because of inverse polarity, support line at 7,531.
DAX 40 rallies as inflation comes in better-than-expected
The DAX 40 started off 2023 on a strong footing, helped by Tuesday’s lower-than-expected preliminary December annual consumer price inflation (CPI) in Germany which came in at 8.6% versus a consensus of 9.1% and 10% in November.
It was the lowest reading since August as a German government one-off payment in December to lower household as well as small- to medium-sized businesses’ natural gas bills came into effect.
The fact that the index managed to close on a daily basis above its 14,125 to 14,129 resistance area on Tuesday, having been capped by it in December, points to further upside with the December peak at 14,677 being in sight. A rise above the December high would eye the June peak at 14,712.
This medium-term bullish technical forecast will remain valid while the index stays above its December trough at 13,697 since it represents the last significant low point.
Support ahead of this low is seen at the 14,161 22 December high.
Dow Jones Industrial Average muted ahead of US Fed minutes
The Dow Jones Industrial Average (Dow) briefly rallied to a three-week intraday high on Tuesday before trading back along the 55-day simple moving average (SMA) at 33,162 ahead of Wednesday’s US Federal Reserve (Fed) minutes which are likely to reaffirm the central bank’s hawkish stance.
The index so far continues to gradually recover from its 20 December five-week low, made at 32,474, marginally above the 200-day SMA which now trades at 32,376, and may revisit Tuesday’s high at 33,492, provided that last week’s low at 32,831 underpins.
Above 32,492 lies the mid-November high at 34,010.
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