Technical analysis: key levels for FTSE, DAX and Dow

Markets digest yesterday’s Federal Reserve data as we see a good chance of a revision to what was a surprisingly good Q2 GDP number.

Source: Bloomberg

The number raises the spectre of monetary tightening in less than a year.The sell-off in government bonds, as a result leaving the two-year note at its highest level since May 2011, is contributing to the decline in equities both here in Europe and the US futures. There’s also a certain amount of month-end positioning adding to the softer edge this morning. 

FTSE eyes 100-DMA

The FTSE 100 is pushing though the 6770-5 level which has provided a base support over the past few days. A daily close through here could signal a pullback towards the 100-day moving average and even the rising trendline support at 6710.

The daily relative strength index is turning down and on the one-hour chart we are testing the 50 retracement from the early July highs to the 10 July lows. The fact that the index has been unable to break above the key moving averages on the same time frame tends to put us on the back foot today.

DAX could bounce back to 9530

The DAX has shed around 5.45% this month and is challenging the 200-DMA. We haven’t seen a concerted break and close below this metric since July 2012. Daily RSI is not oversold and the fact that we’re below the 9500 level, and testing the lows last seen in May of this year, tends to make the 9500-30 level a new resistance point. The next support lies at 9480 then 9390.

In place since the all-time highs earlier this month, the hourly chart is contained within the bearish channel and the RSI is rather oversold so we may be looking at a small bounce back towards 9530 in the near-term.

Dow breaches 50-DMA

The Dow Jones’ monthly chart is looking interesting – we may see a potential early reversal warning with the gravestone doji along with the declining RSI, making the recent highs look a little toppy.

The rising wedge on the daily chart has been breached as has the 50-DMA. Next support comes from 16,710-20 with the 100-DMA coming in below that at 16,650. The one-hour chart has broken the tethers of the rising channel now that the 16,880 level has been breached. Intraday, the 16,800-15 level now becomes resistance.

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