The decline of the euro to an eight-year low against the dollar has taken the remaining wind out of the sails in equity indices this morning. A macro-heavy week lies ahead and despite a drop in Spanish unemployment, the year-on-year CPI reading from Germany at 0% against the 0.5% expected should push the European Central Bank to do more in terms of stimulus. This could be positive for equity indices over the near-term.
FTSE RSI falling
The FTSE 100 is retesting the 6500 marker and it’s worth noting that price action is once again below the long-term trendline from the March 2009 lows. The 6485-90 level is important now and traders will be watching to see if the index respects this level. Any daily close through it would put the FTSE on a journey back towards 6475 then 6415.
With price action below the confluence of the hourly moving averages and the falling relative strength index, we look at best to be consolidating within a 100-point range with the 6585 level at the upper band of the range. A move through here would be bullish and would target 6560.
DAX below 9900
Trading above the long-term trendline, the DAX remains steadfastly below the 9900 level and even attempts to push above 9770 have failed over the past few trading sessions. Support lies at 9665 and the 200-day moving average at 9570.
A move through 9770 (daily close) would target 9848.
Dow looks to 50-DMA
Now that the Dow Jones has relinquished the 18,000 level, we now look to the 50-DMA at 17,675. While above this level, there remains a chance that the index can pare its recent losses. The hourly chart presents a more bearish picture and the rounded top on the chart indicates that while below the 17,850 level that more downside is likely.
We do however have bullish divergence on the hourly RSI so we may see a rangebound action with 17,810 at the top of the range before the next leg up or down is decided.
Keep a close eye on the 17,725 level – a move through here targets 17,660. A push back through 17,890 would help negate the poor risk appetite.