FTSE 100 comes off record high, DAX 40 and Euro Stoxx 50 slip post US CPI reading

​​​FTSE 100 consolidates below all-time record high

​The FTSE 100 has reached a new record high around the 8,000 mark before consolidating as US Federal Reserve (Fed) policy took a hawkish shift after US Consumer Price Inflation (CPI) came in at 6.4% year-on-year in January, above expectations of 6.2% but below the 6.5% reported in December.

Core inflation also came in slightly above expectations at 5.6% versus 5.5% in the prior month.

​UK January CPI came in at a better-than-expected 10.1% year-on-year versus an expected 10.3% and 10.5% in December with core CPI falling to 5.8% versus and expected 6.2% and 6.3% in the previous month. ​

Since triple negative divergence on the daily Relative Strength Index (RSI) accompanied the record high in the FTSE 100 and a wedge is being formed on the daily chart, the odds still favour a reversal lower soon taking shape. ​

Possible downside targets are the 7,876 January peak, followed by last week’s 7,850 low. Failure there would have more bearish implications with the late January low at 7,708 being back in sight.

The medium-term uptrend will remain intact while the index stays above 7,708 on a daily chart closing basis. ​A rise above the psychological 8,000 mark may lead to the 8,050 level being reached.

​DAX 40 may soon be topping out ​

Tuesday’s rally in the DAX 40 took it back to its breached five-week support line which, because of inverse polarity, acted as a resistance line and thwarted the indices’ advance as US inflation data came in slightly higher than expected. ​

Further pressure was exerted on the DAX 40 when European Central Bank (ECB) council member Gabriel Makhlouf in an interview with the Wall Street Journal said that interest rates in Europe could rise above 3.5% and that the central bank is unlikely to cut these in 2023 as it tries to bring soaring inflation under control despite borrowing costs being at the highest level since late 2008.

​Since negative divergence on the daily RSI remains to be seen, a short-term negative bias remains in play for the DAX 40 as long as it trades below Tuesday’s high at 15,531 on a daily chart closing basis. ​

A slip through Tuesday’s Doji low at 15,364 would push the 15,272 to 15,245 January high and the 6 to 13 February lows to the fore. Failure there on a daily chart closing basis, could lead to the more significant 14,992 to 14,904 mid-to-late January lows being targeted. ​

A rise above Tuesday’s high at 15,531 may lead to the early February high at 15,553 being revisited, above which the current February peak can be spotted at 15,656.

​Euro Stoxx 50 comes off its one-year high

​On Tuesday the Euro Stoxx 50 index made another one-year high, this time at 4,280, before being dragged down by weaker US and Asian indices which are repricing the risk of further monetary tightening being implemented by the Fed.

This is after several of its committee members re-iterated overnight that the central bank’s terminal rate is likely to be close to the 5.25% to 5.50% zone versus an expected 5.10% average back in December. ​

Tuesday’s high at 4,280 was made marginally above its February 2022 high at 4,260 but may be followed by a slip to the 4,197 January high, below which last week’s low can be spotted at 4,173. ​

Were the recent highs at 4,276 to 4,280 to be bettered, however, the November 2021 and January 2022 highs at 4,396 to 4,415 would be in focus but would likely represent major resistance.

​Since last and this week’s highs were not confirmed by a higher reading of the daily RSI, the risk of a bearish reversal soon being witnessed remains high. ​

A slip through the 6 February low at 4,187 would push the 4,092 mid-January low back to the fore. While it holds, the medium-term uptrend remains intact, though.