FTSE, DAX Technical Outlook: UK and EU Equities Start the Week Higher

[MongiIG]

FTSE, DAX TECHNICAL ANALYSIS

• UK and EU equities rise on peace talks optimism
• FTSE clears 7000 with ease but a pullback around 7225 threatens to derail bulls
• DAX 40 provides a strong start to the week – bullish and bearish possibilities considered

 

European and UK indices seem to have turned the corner as the bounce off the recent lows would suggest. The proximity to the Ukraine invasion and the Germany’s reliance on Russian energy accelerated the downtrend as the DAX plunged 20% lower than the November high.

Similarly, the FTSE is well above its low and now well above the psychological 7000 level. The FTSE however, did not decline 20% from its high and therefore avoided a technical bear market.

FTSE ANALYSIS AND KEY TECHNICAL LEVELS

In general, European equity markets appear optimistic after Putin mentioned on Friday that recent talks showed ‘positive shifts’ with delegates who are expected to resume talks today.

Looking at the FTSE chart, the RSI has proven rather reliable in preceding bullish reversals but has not had the same effect when it comes to bearish reversals, meaning levels of resistance may provide a better idea of when short term bullish momentum may slow down. For example, today and Friday we witnessed price action trade well above 7225 only to retrace back below it. Ending the day below 7225 suggests that this is a level that bears find attractive, pushing prices towards the psychological level at 7000. However, a break and hold above 7225, opens the door to the bullish continuation with 7306 and 7405 the next levels of resistance.

FTSE Daily Chart

Source: IG, prepared by Richard Snow

DAX 40 ANALYSIS AND KEY TECHNICAL LEVELS

Friday witnessed an incredibly volatile day of trading with the DAX rising above the zone of resistance (13600 -13800) only to fall back below it. Today however, German equities have started the week on a positive note, trading above the zone, which now acts as support.

As mentioned, news of diplomatic progress has supported European equities and opens the door to a bullish continuation. A pullback towards 13800 and subsequent advance would bring 14190 and 14408 into focus as the nearest levels of resistance.

The bullish outlook would need to be re-evaluated should 13600 fail to hold. European equities still remain highly reactive to news out of Ukraine and any sudden set back in talks could easily derail the bullish momentum.

An invalidation of the bullish move would see 13210 as the nearest level of support.

DAX Daily Chart

Source: IG, prepared by Richard Snow

 

 

 

--- Written by Richard Snow for DailyFX.com. 14th March 2022