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Volatility Ahead: FTSE, Dax, Russell in Focus

FTSE Dax Russell
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Financial markets are in consolidation mode as FTSE 100, Dax 40, and Russell 2000 brace for pivotal central bank meetings.

In a dynamic day of trading, the FTSE 100 experienced a fleeting surge, reaching a new two-month high at 7,609 along the downtrend line from September to December. However, the rally was short-lived as the index retraced to its 200-day simple moving average (SMA) at 7,562 following disappointing UK GDP data. Notably, the services sector led the decline, trailed by production and construction.

As investors anticipate crucial announcements from the Federal Open Market Committee (FOMC) scheduled for this evening and the Bank of England (BoE) meeting on Thursday, the FTSE 100 will trade sideways. A potential breach of Tuesday’s low at 7,541 might see a revisit to the 55-day SMA range at 7,493 to 7,478, with minor resistance noted around this week’s peak at 7,609.

FTSE 100 Market Trends:

Change InLongsShortsOI
Daily11%-8%3%
Weekly 3% 3%3%
BEARISH

Volatility Ahead: FTSE, Dax, Russell in Focus

Similarly, the Dax 40 demonstrated a robust uptrend from its October low, achieving a new record high above 16,850 on Tuesday. Despite surpassing German ZEW consumer morale expectations, the ascent occurred in low volume and volatility. All eyes are now on Thursday’s European Central Bank (ECB) monetary policy meeting and the ensuing press conference.

A breach of Tuesday’s all-time high at 16,853 could target the 16,900 mark, while a dip below Monday’s low of 16,735 might signal a retracement towards the October-to-December uptrend line at 16,544.

Meanwhile, the Russell 2000, characterized as a laggard among US stock indices with a modest 7.5% year-to-date gain, reached a three-month high at 1,902 on Tuesday ahead of the Federal Reserve (Fed) meeting and rate announcement on Wednesday. However, investors should exercise caution as negative divergence on the daily Relative Strength Index (RSI) indicates the potential for a bearish reversal.

A break below Tuesday’s low at 1,866 could lead to a test of the October-to-November uptrend line at 1,856 and last week’s low at 1,844. Further support may be found at the 200-day SMA at 1,817 if reached. Conversely, a rally above 1,902 would open the door to the September peak at 1,931. The market awaits critical decisions from central banks, which will likely influence these indices in the coming days.

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