Technical analysis: key levels for FTSE, DAX and Dow

The FTSE is outperforming its European counterparts this morning, aided and abetted by the lack of action from the Bank of England yesterday and the decline in the pound against the dollar. 

City of London
Source: Bloomberg

The European core economies look fairly lacklustre; this has been borne out by the contraction in the last quarter for Germany, while France, unsurprisingly, has stagnated. While this may well raise the possibility of additional stimulus from the European Central Bank, the lack of momentum in growth may well dent sentiment today.

FTSE awaits EZ data

The FTSE remains bid and the moves through the 6645/50 level yesterday should now provide the support. Below that lies the 6620 zone. Relative strength index on the daily chart is beginning to flatten out, and one might wonder if the upside seen in early trade can be sustained in light of the fact the UK relies so much on eurozone activity.

Upside target lies at 6705 which is the 200-daily moving average, and the 38.2% retracement from the February lows to the highs seen in May.

The inverted head and shoulders pattern mentioned yesterday is still in action and, while we might be seeing some negative divergence on the one-hour RSI, this may merely bring about a degree of consolidation – thus a move through 6705 should target 6760.

DAX broadly risk-off

While the DAX has struggled to make any headway through the 9200 level, the level of risk-off in this market is becoming a little more apparent. The 50-hour MA is providing support at the moment, with the 9130 level coming in below that, then 9090.

A break through yesterday’s intraday high around 9216 is needed if the DAX is to target the next main upside resistance at 9360/70.

Dow’s 100-DMA becomes resistance

The Dow Jones put in a great performance yesterday, and in some respects we are beginning to see a degree of separation between US and European markets.

Having hit the 100-DMA, the stated target in yesterday’s analysis, that level will now present a level of resistance. A daily close above 16,675 would set the Dow up for additional gains, with 16,730 the next level on which to focus.

Support now comes from the 16,600/20 zone with 16,521 coming in under that. 

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