Poor German macro data appears to be ramping up speculation that quantitative easing is on the way, and the fact we momentarily saw oil stabilise ultimately helped risk appetite yesterday.
Today is a more muted affair with early morning trade despite better-than-expected UK manufacturing output which has had little impact on the FTSE 100, with only cable benefitting to the upside.
Today’s non-farm payrolls report will likely help decide overall direction in the equity space and we can expect to see a degree of sideways movement in the run up to the announcement. The headline number is important, with expectations for a print of around 240,000 jobs. Keep an eye on any revisions to the previous month’s number.
It will also be important to watch for average hourly earnings, which are expected to increase 0.2% on the month.
FTSE's daily RSI above 50
The 50-day moving average at 6580 is acting as a cap on the FTSE's daily chart and this coincides with the 61.8% retracement from the highs of 6900 in September, to the lows around mid-October.
Daily relative strength index is starting to turn down a little but remains above 50. A daily close through here would put the index on a move towards the 200-DMA at 6666. A break above 6705 is needed if we are to make any inroads towards the September highs.
On the hourly chart, the 50-hour moving average looks like it may rise through the 200-H MA, and this will provide a degree of basic support around the 6515 level should we see any intraday declines. A fall below the 6500 level would see the FTSE back in the down-trending channel from the highs of 29 December.
For now, the consolidative pattern implies more upside. A break above 6580 targets 6620 in the short-term.
DAX price action capped at 9860
Now above the 50-DMA, it all looks fairly positive for the DAX on the daily chart. Price action is capped by the previous resistance at 9860 but we could expect that the moving average will support any moves to the downside around 9740. Below that lies 9700.
The hourly chart shows that the upside moves yesterday ran into the trendline resistance from the December 16 lows. We are trading in a flag-like range with the 9795 at the base of said range.
Again the rising 50-H MA looks like it might make a bullish crossover through the 200-H MA, which will then provide an element of support at 9708.
With bearish divergence on the hourly RSI, sideways action seems likely in early trade — a move through 9852 targets 9945.
Dow could see bullish end to week
The Dow Jones was unable to stay above the 17,900 level yesterday with profit-taking after a stellar move capping gains. Assuming we end the week at least around the 17,850 level, the weekly candle will result in a bullish hammer similar to those seen back in mid-October and December. This could parlay into a break through the recent record highs.
The 50-week MA has been an excellent support metric for this index so it is important to watch for any moves down to this area over the coming weeks as it may provide an opportunity.
Shorter-term, the index is displaying the same consolidation pattern as the DAX and the FTSE. A break above the 17,920 level puts 18,000 in view in short order. Support lies at 17,791 with the 17,704 below that.