DAX and FTSE vulnerable as market sentiment remains cautious – DailyFX | Jewelry Dukan

  • DAX40: Indecisive as we hover around the 13000 key mark.
  • FTSE100: Makes marginal gains despite weak sentiment.

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DAX 40: Undecided as we hover around the key 13000 mark.

That DAX vacillated between losses and gains in European trading as sentiment remains fragile. Investors stay after the US CPI printHowever, it looks unlikely that stocks will fall much lower ahead of next week’s Federal Reserve meeting.

On the energy front, the Eurozone began preparing for mass power outages expected over the winter months. The European Commission has put forward a proposal calling on governments to help reduce usage by 10% and by 5% during peak periods. The German regulator, meanwhile, warned that the likelihood of gas shortages remains this winter. Gas contracts were higher for the third straight day as interventions by the European Commission appear to be having limited impact at this time.

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The index remains under pressure as policymakers have the unenviable task of battling rising inflation, falling currencies and a slowdown in economic activity. To put this point in perspective, Barclays Bank has said it expects a recession in the first half of 2023, with the bank forecasting a more than 1% contraction for the eurozone economy.

DAX 40 daily chart – September 15, 2022

Source: trading view

Technically, last week’s bullish close was followed by early week gains before we saw a sentiment reversal that happened to coincide with a variety of technical confluences. We saw a sell off of about 480 points coinciding with this 50% Fib leveltrend line as well as the 100 SMA. The day candle included as doji and above the key 13000 level, again underscoring the current indecisiveness in the markets. Better value is found on smaller timeframes as the long-term trend is difficult to predict at this point.

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FTSE 100: Making marginal gains despite weak sentiment.

That Blue Chip Index notched marginal gains in early trade before retreating to trade near flat as the US session approaches. Markets are showing signs of stabilization after Tuesday’s sell-off, however, upbeat US retail numbers later today could spur another risk-off rally.

In corporate news, the Shell (SHEL) Group announced that its current CEO will resign at the end of the year. Current CEO Ben van Beurden, who has been with the company for almost four decades, will be succeeded by Wael Sawan, the company’s head of gas and renewable energy. The company’s share price rose 1.5% during the session. Rolls Royce PLC (RR) led gains, up 5% in the session, while Scottish Mortgage Investment Trust (SMT) saw its shares soar as much as 4%, largely on its stakes in a number of Nasdaq-listed stocks listed companies.

Bank stocks are likely to rally as next week’s Bank of England meeting approaches, on expectations that higher interest rates will translate into higher earnings. Against this backdrop, we have upgraded lenders Lloyds Banking Group (LLOY) and NatWest (NWG) shares by 0.7p to 47.1p and 4.4p to 274.1p respectively.

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FTSE 100 daily chart – 15th September 2022

Source:trading view

That FTSE remains under pressure after tremendous Tuesday close bearish engulfing on the daily time frame that keeps the index within its range. The range between 7600 and 7000 has been strong with choppy price action to boot. We have seen a higher low followed by a lower high as price action on the higher time frames is providing mixed signals. We’re trading back under that 20.50 and 100 SMA which offers strong resistance just above current prices, with strong support areas below the 7300 area. Traders may find better value by looking at lower timeframes as the daily timeframe remains choppy.

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Key intraday levels worth watching:

Support areas

resistance areas

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Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda

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