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.
The actual falls in the day amounted to little more than 2%. The question now is if the release of the non-farm payrolls number will exacerbate or medicate.
Strong growth is expected, with a consensus view that 231,000 jobs will be added. Wage growth, given that this is the focus for the Federal Open Market Committee, will be the real number to watch. A 0.2% growth in average hourly earnings is expected. Anything higher than this will aid dollar strength and heighten the speculation and timeframe for a hike in interest rates.
FTSE drops through 200-DMA
Now that the FTSE has dropped back through 6710 and the 200-day moving average, we must seek the support of the 11 July lows, which were around 6650. The rising trendline support from the lows of August 2011 has been punctured in early trade, but a daily close below it would have greater conviction than the current intraday price action.
The decline on the hourly chart is rather steep, and while below the 6680 level there remains a risk of a return to the recent lows of 6640-50. The relative strength index is indicating a degree of positive divergence so we may well see a retracement towards 6700-10.
Any moves through 6643 take us back towards the April levels of around 6620 with 6550 below that.
DAX supported by 9215
The DAX has been punished and sentiment towards this index looks more than a little dented. Price action has fallen and closed below the 200-DMA for the first time in two years. The daily RSI is looking a tad oversold yet the market continues to push lower. Some of this will be the triggering of stop losses below that key metric. The next support is at 9215-20 then 9180, then 9080 (April low) beneath that.
Given the steepness of the pullback, we may see a bounce on some profit-taking which would target 9350-60.
Dow price action back at 16,516
The rising wedge formation has completed on the Dow with price action back at 16,516. The 16,500 level is very important here as it marks the rising trendline support from the November 2012 lows.
Beneath that is the 200-DMA at 16,355. The RSI is looking oversold on the same timeframe and on the hourly chart we have mild bullish divergence potential. The 16,532 level is the 50% retracement from the May lows to the all-time highs, and this should now serve as resistance with16,600 above that.
Intraday, 16,445 has acted like a congestion zone in the past – a dip through here takes us back towards the 200-DMA.