The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Greece and Ukraine dominated the agenda yesterday, but these elements have receded from view this morning as markets await the next set of non-farm payrolls from the US. The headline number will command most of the attention, but the real weight of the report will be in the average hourly earnings figures. These need to show real growth, since the poor improvement in earnings has been one of the key drags on the US economic recovery, a point not lost on the Federal Reserve.
European indices have looked less healthy in recent sessions than their US counterparts, although they are still within easy distance of the highs seen in previous weeks. Greece will be the biggest problem here, although if the Merkel/Hollande mission to Kiev and Moscow fails to create a new peace deal, bearish sentiment may return.
FTSE restricted by 100-point range
The 100-point range seen for most of the week continues to keep the FTSE 100 pinned down. We are unlikely to see this change, given that the non-farms are on the calendar for the day.
The FTSE has opened below the trendline in evidence since the middle of January, a potentially bearish development in the short-term. A move below 6800 would then target the 6680 level, around the 200-DMA, followed on by the 50-DMA at 6600. The negative divergence on the relative strength index highlighted over the past two days seems to have begun to make its presence felt.
On the hourly chart we are seeing some support around the 50-DMA, while additional support may enter the frame around 6800, close to the lows of Wednesday and Thursday, and then on to the 6750 zone.
Warning signs for DAX from RSI
The consolidation continues on this index, as it too finds itself caught in a 100-point range. A close below the 10,800 area means that we could see support at 10,600, but below that the index still risks a move back towards the 50-DMA at 10,060.
As with the FTSE, the daily RSI’s trend is still downwards, which should flash warning signs for those expecting a move back towards 10,900. Although it has seen new all-time highs this week, the index still looks over-extended in the short-term
Dow eyes 17,890
Yesterday’s session saw the Dow Jones punch through the downtrend that has held it back since late December. It managed to close above the 10,800 high from late January, while the next immediate target is the early January high of 17,890. Solid closes above these two levels would then mean the 18,100 all-time high is in play once again.
On the downside, the descending trendline that was resistance may now be support, coinciding with the 50-DMA at 17,650. A break below here would target the 100-DMA at 17,400 and then the 200-DMA, which also sits close to rising trendline support from the October lows at 17,100.