Indices fall out of bed amid global risk-off sentiment
Outlook on FTSE 100, DAX 40 and Nasdaq 100 ahead of a plethora of rate decisions.
FTSE 100 drops to May low
Last week the FTSE 100 was rejected by its key long-term resistance zone at 7,648 to 7,690 which consists of the January 2020 as well as this year’s February, April, May and current June highs as the UK was predicted to be the worst performing economy in G7 by the World Bank and then the Organisation for Economic Co-operation and Development (OECD).
Pushing the FTSE 100 still lower was the release of unexpected 40-year high US inflation data on Friday, increased by 1% from last month and by 8.6% on a year-on-year basis which led to global risk-off sentiment as traders worry about a more hawkish policy by the US Federal Reserve (Fed).
Today the Confederation of British Industry (CBI) has warned of an increasing UK recession risk which has made the FTSE 100 open lower still and means that the index is fast approaching its 7,157 May low, a slip through which would push the March trough at 6,764 to the fore.
Minor resistance comes in along the breached four-month support line and the 200-day simple moving average (SMA) at 7,341 to 7,355.
DAX falls like a stone towards its 13,275 May low
The DAX 40 continues to rapidly fall from last Monday’s 14,712 high after Wednesday’s OECD Economic Outlook lowered its 2022 global growth forecast to 3% due to the war in Ukraine which has greatly impacted Germany amid its reliance on Russian oil and gas.
Last week’s European Central Bank (ECB) statement in which it mentioned a rate hike in July and an end to its asset purchase programme in June, together with a 40-year high in US inflation data out on Friday, led to further declines towards the May low at 13,275 taking place. Failure there would engage the March low at 12,432.
Resistance comes in at this week’s gap with Friday’s low at 13,681 to 13,743 and at the 13,868 25 May low.
Nasdaq 100 gaps lower
The Nasdaq 100’s recovery off its one-year low at 11,490 ended at its early June high at 12,942 with the index having since dropped back close to its 11,490 May low, accelerating to the downside in the past three days.
This was on the back of stronger than expected US consumer price index (CPI) data which came in at a 40-year high at a higher than expected 8.6% on Friday, leading to global risk-off sentiment and pushing equity markets around the world lower.
A large gap between Friday’s low and this morning’s pre-market open has so far formed at 11,822 to 11,643 as Asian equity indices dropped as well, with the May low at 11,490 thus being within reach today ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting.
A daily chart close below 11,490 would engage the significant 11,072 to 10,677 support area which encompasses the July 2020 high, September and November 2020 lows as well as the 200-week simple moving average (SMA).
Minor resistance today comes in at this week’s 11,822 to 11,643 gap.
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