Levels to watch: FTSE, DAX and Dow

The Federal Open Market Committee minutes last night didn’t really provide anything new, and if anything showed the central bank to be indecisive and fairly non-committal. 

US Federal Reserve
Source: Bloomberg

There was muted reaction in equity markets in the immediate aftermath, but the bond market ultimately construed the minutes as dovish. The Fed emphasised that it could raise interest rates even while inflation remains below its target, implying that FOMC members think the current downward pressure on the prices is transitory.

Oil prices may be off the lows but are still under pressure, so it remains to be seen if we are enjoying a temporary relief rally or if we can expect a V-shaped recovery similar to what has occurred following the downside corrections in October and December.

FTSE supported by 6450

Hampered for now by the 6490-6500 level, the FTSE has bounced quite significantly. This level was the line in the sand earlier this week, so a move through here and a daily close could see additional upside for the UK benchmark and target the 100-day moving average at 6555.

We would need to see the bearish channel resistance on the one-hour chart overcome, coupled with a drive through the 200-hour moving average to achieve this feat. Currently the market looks a little overbought, in the short term, at these levels.

Support is now found at 6450 (50% retracement), with the 6400-15 area beneath that.

DAX could target 9700

The DAX has also staged its recovery and found a base at the 200-DMA around the 9570 level. Price action is now above the trendline from the October 16 lows, and we may well see the 9700 targeted in the near term. We would need to see the index move through the 9670 level and short-term trendline resistance from the all-time highs in order to see this level challenged.

This is also the 38.2% retracement on the same timeframe, and attempts this morning to make a break higher have registered as being overbought on the short-term relative strength index. Support is now found at 9580-9600.

A move down through the 9580 level would target the 50-hour MA.

Dow eyes 17,820

A bounce higher overnight has seen the Dow Jones make an attempt at the 17,730 level. Price action has run into the barrier at the 50-DMA, so we would like to see a daily close through here if the 18,000 level is to come back into view. The rising RSI on the daily chart looks positive and support should be found around 17,650.

A push through the 17,745-50 level would see the 200-hour MA at 17,820 targeted in the near term.

Any falls through the 17,560 level would put the index back in the down-trending channel from the December 31 highs, and would likely see a move towards 17,500.

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