Levels to watch: FTSE, DAX and Dow

Indices can look back on a good week, having seen bullish sentiment rebound. A busy day ahead however will likely signal a quiet session, as we await key data and speeches from major central bankers.

US traders
Source: Bloomberg

It is not going to be a quiet Friday. German IFO data, US CPI figures and then a series of central banker speeches will make for an interesting day. The world’s leading monetary policy figures have descended on Cintra in Portugal (the scene of a highly controversial event during the Peninsular Wars) for an European Central Bank forum. While they may not comment directly on policy, we can at least expect some oblique references to it.

FTSE could test 7100

London’s main index has been tiptoeing higher over the past few sessions, slowly consolidating its hold above 7000. Assuming this can continue today, we are looking towards a test of the zone from 7060, with 7100 still standing out as the key level to watch. The FTSE 100 has remained relatively immune from the outbreak of bullishness that has sent most other markets moving higher, but there is reason to expect that eventually this market will gain more ground as well.

Until we see a close above 7100, however, we cannot be sure that this rally will extend further into the end of May. Nonetheless, any dips should find support around the 50-day SMA at 6970, or just below at the rising trendline off the December lows.

DAX could find support around 11,480

The DAX is now looking to consolidate after breaking out from its descending channel earlier in the week. The 50-day SMA around 11,850 continues to provide some resistance, but assuming the index can hold above 11,800 then we look towards targets at 12,000 and then 12,400. On the four-hour chart the 20-period EMA at 11,722 remains above the 50-period EMA (11,665), but as the stochastic indicator remains at elevated levels I would prefer to stand aside to wait for a more sustained pullback, preferably pushing the stochastic into oversold territory, before going long.

If the index does slip back, support is possible around 11,480, but this would then put us back in the descending channel that dominated late April and early May.

Dow could see buyers around 18,050

Having failed to hold the highs seen earlier in the week the question is now whether the index can sustain the bounce. A move through the week’s high at 18,365 would confirm that more gains are on the way (although given the plethora of central banker speeches on the calendar today we can probably write that off for now), while a failure to hold 18,188, around the 14-day EMA, would signal that the rally has run its course for the moment.

On the hourly chart we have seen the 50-hour SMA cross below the 100-hour SMA, a bearish sign, with the 200-hour MA at 18,217 providing first possible support. Should this fail then we look towards the lows around 18,050 and then 17,950 as areas where buyers may make a stand. 

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