This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Janet Yellen spoke out on Friday, underlining her view that a continued improvement in the US economy would bolster the case for higher interest rates. Of course, this observation comes with the usual caveats of ‘If’ the US economy continues to improve. Given Q1 was so poor, dollar bulls should be cautious before assuming that we are now on the home straight to the first rate hike since 2008.
It wouldn’t be the start of a new week without some news from Greece, and the turbulent country has duly delivered, with reports that it cannot meet the next repayment demand from the International Monetary Fund. Meanwhile, markets have been hit by comments from the head of the European Stability Mechanism, Klaus Regling, who has raised the dreaded ‘insolvency’ word with regards to the immediate future.
FTSE upside bias remains
The index commenced the battle for 7000 anew this morning, dropping back below this level but finding some support at the 50-day simple moving average (6975). A bounce from here would challenge resistance around 7050, with a further advance once again testing resistance around 7100.
Crucially the index is still above its rising December trendline, and while this holds the bias remains to the upside. Admittedly it has shown little ability to move higher, but once the flow of bad news clears buyers may have the ability to push the market higher.
DAX eyes 11,900
Given the barrage of news this morning it is still not certain whether this morning marks the beginning of a new leg down or a pullback following the solid move higher witnessed over the past week. The index has tested the 200-hour moving average at 11,690, but bounced so far, so a first move higher would head towards 11,900. This would then clear the way for another attempt to breach 12,000.
Downside scenarios are capped by the 14-day EMA at 11,740, but a more serious dip would head towards 11,350 and the 100-day SMA.
Dow could return to all-time highs
A steady retreat from all-time highs has been chivvied along by Janet Yellen’s comments, but we may see support come in at around 18,115. Oversold stochastics on the four-hour chart may lead to a bounce however, which will put the index back on course for all-time highs.