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Futures hold steady as US earnings season begins

Outlook on FTSE 100, DAX 40, and DOW, all of which are being underpinned by support.

​FTSE 100 holds at minor support and is trying to regain yesterday’s losses

Yesterday the FTSE 100 slid to minor support at 7,533 to 7,522, which held, amid fears about soaring inflation, central bank tightening and rising bond yields.

Today the index is trying to recover and stay above that support area as the UK consumer price index (CPI) for March came in stronger than expected at 7% year-on-year (versus an expected 6.7%) and core CPI at 5.7% year-on -year (versus 5.3% expected).

From a technical perspective a series of higher highs and higher lows, the definition of an uptrend, will be maintained while the index remains above the 31 March low at 7,489. Below it meanders the 55-day simple moving average (SMA) at 7,451.

Minor resistance for today sits at the 5 April high at 7,619, and more significant resistance in the 7,671 to 7,690 region which contains the January 2020, February 2022, and last week’s highs.

Were this resistance zone to be exceeded, the July 2019 high at 7,730 would be in focus.

DAX 40 tries to stem its descent

The descent in the DAX 40, caused by the US Federal Reserve (Fed) reasserting its hawkish stance and hinting at a rapid balance sheet reduction, as well as initial worries about the outcome of the first round of the French presidential election has taken the index briefly below the 38.2% Fibonacci retracement of its March rally at 13,975 before stabilising slightly.

As long as yesterday’s low at 13,882 isn’t slipped through, a recovery towards the 31 March low at 14,323 and the 55-day SMA at 14,519 may be witnessed.

For the March uptrend to resume, the 5 April high and this year’s downtrend line at 14,605 to 14,668 would need to be exceeded.

Failure at this week’s 13,882 low would push the 24 February low and 50% retracement at 13,795 to 13,680 to the fore. This area offers potential support ahead of the 15 March trough at 13,577.

Dow flirts with 55-day SMA, having bounced off support

The Dow Jones Industrial Average declined last week as US Federal Open Market Committee (FOMC) minutes of the March meeting showed that several Fed officials would have preferred a 50-basis point increase in the Fed funds rate, instead of last month’s 25 basis points.

This took the index to key support at 34,181 to 33,979. It consists of the 22 February to early March high as well as the breached 2022 downtrend line which, because of inverse polarity, now acts as a support line, and is expected to continue to hold today.

Provided that it does, a rise back towards the 8 April high and 200-day SMA at 34,916 to 35,022 may unfold.

The next higher 2022 downtrend line and last week’s high at 35,090 to 35,105 will need to be overcome for the March uptrend to resume.

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