Disinflation is one thing, but the current levels are probably not acute enough to spur Mario Draghi into action. PMI data was, for the most part, good – both manufacturing and services output.
The non-farm payroll report tomorrow is likely to be either the straw that breaks the camel’s back (it’s back being the current bullish momentum) or the driver for additional upside.
FTSE trapped below 200-period MA
Price action on the FTSE 100 is still confined below the 200-period moving average on the H4 chart, while the relative strength index registered as overbought on the same timeframe, which is the reason for the small pullback that we are presently witnessing.
This particular metric – currently at 6680 – has served a useful pivotal area for judging the next bout of explosive upside, so I will be watching carefully for a puncture of the level in a bid to see the FTSE move up towards 6794.
On the daily chart, we are anchored to the 50-and 100 DMA, and we would ideally like to see this hold on a daily close (6655). RSI momentum is still above 50, although we are seeing the momentum flattening a little.
The 6637 (100-H MA) will be the next target if any prolonged decline takes hold in the short-term, then the 6606 level if this is breached.
Dow reaches for December highs
On the Dow Jones, we have almost made our way to the top end of the market – the December highs is 16,594 – albeit 100 points short. RSI on the daily is currently at 68, very nearly entering the overbought arena, yet the crossing of the 50-DMA through the 100-DMA yesterday tends to invite additional upside. Watch for a break through yesterday’s highs of 16,588. The bearish spike candle on the H4 chart will then be nullified to an extent, despite the fact that the RSI on the same time frame is at 76.50.
The one-hour chart is showing price action at the top of the bullish channel which has been in action since 16 March. Having risen in a somewhat parabolic mode since last Friday, the RSI is showing some bearish divergence too.
Support comes from the 50-H MA at 16,540.
DAX has strong support at 9600
The downtrend resistance from the 24 Jan highs is still knocking the upside for the DAX. The support at 9600 is still strong so we will be watching for a break through yesterday’s highs of 9647 if we are to make an attempt to move towards 9697.
It’s a tight consolidation range for now with support at 9540 should the 9595/9600 succumb to selling. The H4 chart could be showing a pennant formation which, if broken to the upside, targets 9735.