European and US indices mixed ahead of FOMC
Technical outlook on FTSE 100, DAX 40, and Nasdaq 100 ahead of today’s FOMC meeting.
FTSE 100 flirts with mid-May high
The FTSE 100 continues its recovery rally from last week’s 7,227 low, made close to the current May low at 7,157, and is revisiting its mid-May high at 7,545 after last week’s sharp declines triggered by recession fears and the annual inflation rate rising to a 40-year high at 9% in April compared to 7% in March.
A rise and daily chart close above last week’s high at 7,545 would engage the 7,621 early May high. Above this level key resistance remains to be seen in the 7,657 to 7690 area which consists of the January 2020, February, and April highs and as such is likely to cap.
Support comes in along the 55-day simple moving average (SMA) at 7,455 with further minor support being found at the 2 May low at 7,390 as well as between the 11 May high and the 200-day SMA at 7,354 to 7,330.
Provided the current May trough at 7,157 isn’t slipped through, a bullish bias remains in play.
DAX 40 capped by 2022 downtrend line but nonetheless remains bid so far
The recovery rally in the DAX 40 from last week’s 13,685 low stalled at this year’s downtrend line with the index once more trading below the 55-day SMA at 14,098 after this morning’s German GfK consumer confidence data for June came in at a worse than expected -26.0 compared to a forecast -25.6 and revised -26.6 record low in May.
This year’s downtrend line at 14,185 is likely to be retested, however, provided that the DAX 40 remains above last week’s low at 13,685 on a daily chart closing basis. If so, the early May, this and last weeks' highs at 14,228 to 14,315 are expected to be revisited.
A rise and daily chart close above the 14,315 early May high would have medium-term bullish implications and would bring the 14,599 April high into view. For a longer-term bullish picture to emerge, a rise and daily chart close above the late April high at 14,599 needs to take place.
Slips below yesterday’s 13,907 low may find support between the mid-April low and the 11 May high at 13,882 to 13,875. Further minor support can be found at the 13,807 2 May low and at the 13,538 April trough.
Nasdaq 100 trying to level out ahead of FOMC minutes
The Nasdaq 100’s swift descent has so far taken it to a one-year low at 11,490 in the midst of soaring inflation, aggressive US rate hikes amid the possibility of a looming recession, and mainly disappointing earnings from its constituents.
The tech-heavy Nasdaq Composite fell 2.8% last week and this week has tried to level out ahead of today’s US Federal Open Market Committee (FOMC) meeting.
Since last week’s low at 11,490 has not been accompanied by a lower low on the daily Relative Strength Index (RSI), positive divergence can be made out on the daily chart. This often leads to at least a minor counter-trend move being seen.
Add to that yesterday’s “Hammer” formation on the daily candlestick chart, and there might be a glimmer of hope for the index with it possibly finding at least an interim low around current levels.
Therefore, from a technical perspective, as long as last week’s low at 11,490 isn’t slipped through, Friday’s high at 12,092 may be revisited.
Above this level the April-to-May downtrend line can be spotted at 12,385 and last week’s high at 12,588 as well as the breached February-to-early May support line, now - because of inverse polarity - resistance line, at 12,610 which is expected to cap, though.
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