Levels to watch: FTSE, DAX and Dow

The FTSE tumbles at the open, following sterling strength. Meanwhile, the Dow continues to turn lower following a rally into Fibonacci resistance.

Trader reflected in data board
Source: Bloomberg

FTSE breaks through key support level

The FTSE has broken below the crucial 7308 support level this morning, with a resurgent pound proving a drag on the index. The break through trendline support also provides clues that we could be set to embark on a period of weakness following an unprecedented run. Further confidence of such a reversal would come with an hourly close below 7264, which represents a more important swing low.

However, the trendline and 7308 break provides an increased chance of weakness. With Theresa May set to speak this morning, we are likely to see significant volatility for the FTSE. In which case, the ability or inability to break below 7264 could provide us with clues of the next move.

DAX falls into key Fibonacci support

The DAX has similarly sold off this morning, with the index bouncing from the 76.4% retracement. This represents a very interesting area for potential long positions. Essentially the current period of weakness looks like a retracement of the rally from 11,401 and as such, we would need to see an hourly close below that level to instigate a bearish outlook. Until then, this current weakness is perceived as a short-term phenomenon which will likely resolve with another move higher.

Dow turning lower following deep retracement

The Dow Jones is weakening following Friday’s rally into the 76.4% retracement. This coincides with the wider pattern of lower highs and lower lows for the pair.  With that in mind, further downside is expected, with a break back above 19,977 required to negate this current bearish outlook.

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