This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The European core economies look fairly lacklustre; this has been borne out by the contraction in the last quarter for Germany, while France, unsurprisingly, has stagnated. While this may well raise the possibility of additional stimulus from the European Central Bank, the lack of momentum in growth may well dent sentiment today.
FTSE awaits EZ data
The FTSE remains bid and the moves through the 6645/50 level yesterday should now provide the support. Below that lies the 6620 zone. Relative strength index on the daily chart is beginning to flatten out, and one might wonder if the upside seen in early trade can be sustained in light of the fact the UK relies so much on eurozone activity.
Upside target lies at 6705 which is the 200-daily moving average, and the 38.2% retracement from the February lows to the highs seen in May.
The inverted head and shoulders pattern mentioned yesterday is still in action and, while we might be seeing some negative divergence on the one-hour RSI, this may merely bring about a degree of consolidation – thus a move through 6705 should target 6760.
DAX broadly risk-off
While the DAX has struggled to make any headway through the 9200 level, the level of risk-off in this market is becoming a little more apparent. The 50-hour MA is providing support at the moment, with the 9130 level coming in below that, then 9090.
A break through yesterday’s intraday high around 9216 is needed if the DAX is to target the next main upside resistance at 9360/70.
Dow’s 100-DMA becomes resistance
The Dow Jones put in a great performance yesterday, and in some respects we are beginning to see a degree of separation between US and European markets.
Having hit the 100-DMA, the stated target in yesterday’s analysis, that level will now present a level of resistance. A daily close above 16,675 would set the Dow up for additional gains, with 16,730 the next level on which to focus.
Support now comes from the 16,600/20 zone with 16,521 coming in under that.