Forex Trading Library

Indices in Focus This Week

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The first trading day of the week comes with lacking fundamentals across the board, which will likely lead global equities to trade within a tight range and a low volume. However, this week’s big day for indices is around the corner, and traders should be ready to act.

 Why This Week?

After the ECB’s decision to keep the current stimulus package unchanged with no hints to increase or extend the current QE, global equities now look towards the Federal Reserve’s decision, hoping for an action to stabilize the market on Wednesday.

What To Expect

There are many scenarios for this decision, which we will cover later on. Yet, we know that this event might be one of its kind this year and that is primarily because it might be the day in which the Federal Reserve raises rates for the second time in almost a decade of low rates. Regardless of whether there will be a rate hike or not, traders should predict an extreme market reaction, but knowing the direction of this reaction is not as easy as you think. There are many factors involved, which we will discuss later this week.

 DowJones Industrial Average

The DowJones Industrial Average suffered a notable selloff last week. This was due to many factors including the disappointment from the ECB’s decision, but more importantly, from US economic releases, which raised the estimates for a rate hike by the Fed later this week.

There are various scenarios for the upcoming move, but most of them depend on the Federal Reserve’s decision.

1-      The easiest scenario would be as follows: if the Federal Reserve raises the Fed Fund Rate, the reaction would be sharply negative, and investors are likely to rush into the US Dollar.

2-      If the Federal Reserve managed to keep rates on hold with a dovish tone (no rate hike this year), this would lead investors to jump back into buying stocks.

3-      Keeping the rates on hold with a hawkish tone (promise to raise rates in December) would keep the market in a high volatility mode with no clear direction, causing prominent uncertainty in the markets because the Fed has been promising to raise rates for almost a year.

These scenarios apply to the rest of global equities, especially in the US, including DowJones Industrial Average, S&P500, and Nasdaq. As for Europe and Asia, they are likely to experience the same impact, but the recent disappointment from the ECB and the BOJ will keep the downside possibility on the table. Therefore, any upside rally might be short-lived.

Levels To Watch


S3 S2 S1 R1 R2 R3
DowJones 17930 18050 18138 18250 18311 18400
S&P500 2120 2130 2140 2151 2158 2169
FTSE100 6579 6632 6665 6735 6760 6831
DAX30 10155 10252 10309 10400 10451 10518
Nikkei225 16235 16361 16465 16618 16770



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