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Levels to watch: FTSE, DAX and Dow

Bank of Japan action provides European markets with another leg higher, while the Dow remains rangebound pre-FOMC.

Data chart
Source: Bloomberg

FTSE rally continues apace

The FTSE 100 has seen another leg higher this morning, following on from the latest BoJ action overnight. The wider picture remains one of lower highs and lower lows, which remains in place until we see a break back above 6932.

Nevertheless, with price having driven past the 76.4% retracement, there is a growing chance of a break higher from this month’s low pullback. Essentially, we remain open minded to a potential reversal, with a break through 6932 required to negate that.

However, it is worth watching for a bearish reversal signal first which would come with a break and hourly close below 6813. Until that happens, traders are likely to continue buying into dips.

FTSE 100 daily chart

DAX breaks through key resistance level

The DAX has broken through a key resistance level at 10,481, which follows on from the BoJ announcement. This negates the recent weakness and provides us with a strong bullish outlook for the coming days.

Given the rally through 10,481, any pullback is seen as a good buying opportunity, with the bullish outlook held unless we see an hourly close back below 10,368.

The recent downside brought price back to a descending trendline, which represents the upper threshold of a symmetrical triangle. As such, this recent bounce from the line provides us with a good chance of a period of strength for the index.

DAX daily chart

 Dow remains rangebound

The Dow Jones has been caught in a 190-point range over the past week, with price now close to the top of this range. That puts us back into a position where we could potentially see another short-term pullback ahead of the Federal Open Market Committee. It is likely that this evening's Fed meeting will provide us with the breakout for the Dow, with an hourly close above 18,245 or below 18,067 likely to provide a directional bias. 

The Dow Jones Chart

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