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Indices outlook: European indices on the back foot ahead of Fed minutes release

The FTSE 100, DAX 40 and S&P 500 have given back recent gains ahead of tonight’s publication of FOMC minutes as investors worry about the Fed soon aggressively reducing its balance sheet.

​FTSE 100 gunning for its 7,688 February high

The FTSE 100 has managed to heave itself above the 25 February high as it continues its ascent towards the February peak at 7,688, unperturbed by worries about the Federal Reserve (Fed) reducing its balance sheet next month.

The ongoing advance in the index probably has to do with the FTSE 100 having a more defensive makeup than its peers.

Minor support below yesterday’s low at 7,536 remains to be seen at the 23 March high at 7,522, below which sits the 31 March low at 7,489. While above there, the bulls should remain in charge.

Below 7,489 meanders the 55-day simple moving average (SMA) at 7,438.

DAX 40 stays below 55-day simple moving average

The DAX 40 is still trading sideways below the 55-day SMA at 14,642, having been dragged lower by US and Asian markets overnight following hawkish comments by one of the US Federal Reserve's usually more dovish members.

Vice chair-elect, Lael Brainard, said that she sees a balance sheet reduction soon and 'at a rapid pace..., if warranted.'

The index has so far revisited last week’s low at 14,323 below which lies the 24 March low at 14,187. Only a rise above yesterday’s high and the 55-day SMA at 14,642 would push the 2022 downtrend line at 14,785 to the fore, above which key multi-year resistance remains to be seen at 14,840 to 14,917. This goes all the way back to May 2021.

In case of the March high at 14,927 being exceeded, the 200-day SMA at 15,399 would be targeted.

S&P 500 slips back towards 200-day simple moving average

Yesterday the S&P 500 formed a Bearish Engulfing pattern on the daily candlestick chart as US bonds dropped aggressively on the back of the Fed’s known dove, Lael Brainard’s comments which put the reduction in the Fed’s balance sheet back at the centre of the monetary policy discussion.

A slide towards the 200-day SMA at 4,495 is currently underway. Below it there is no significant support to speak of until the 55-day SMA and the early March high at 4,414 to 4,422.

Only a currently unexpected rise and daily chart close above yesterday’s high at 4,593 would negate the current bearish bias.

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