The CAC40 Futures (EURONEXT: FCE) witnessed a compelling surge, riding a bullish wave that persisted for five consecutive weeks. Last week, this momentum led to a 1.18% surge, propelling the index to breach its historical peak and notch a new record at 7665.0. This meteoric rise unfolded amidst a global equity rally, underpinned by market optimism fuelled by expectations of dovish Federal Reserve actions.
The catalyst behind this surge resides in economic indicators with declining inflation and a sluggish labour market in the world’s largest economy that have boosted expectations of imminent rate cuts. This dovish outlook fostered a risk-on sentiment, propelling equities skyward while both the Greenback and U.S. treasury yields wavered.
As the week unfolds, market focus shifts to pivotal indicators. The Fed’s preferred inflation barometer, the PCE Index for November, assumes the spotlight, pivotal in affirming or refuting expectations for impending rate cuts. Simultaneously, Euro Area inflation, nearing the European Central Bank’s (ECB) 2% target, expected to be 2.4%, holds sway over the CAC40 Futures. Should inflation align with expectations and decline, the prospect of ECB rate cuts could further elevate the CAC40 Futures.
Technical
The CAC40 Futures have enjoyed an upward trajectory, confidently positioned within an ascending channel pattern well above the 100-day moving average. Recent movements unveiled significant levels shaping its journey.
The lower boundary of the ascending channel marked a sturdy support at 7322.5, eliciting a robust surge after a minor dip, amplifying bullish sentiments. However, this ascent met resistance at 7665.0, aligning with the channel’s upper boundary, capping the index’s steep surge.
Presently, a reversal unfolds, triggered by overbought Relative Strength Index conditions. The futures have retraced toward the 23.60% Fibonacci Retracement level, signalling a potential shift in momentum.
Should downside pressures persist, breaching the 23.60% level might pave the way for further declines, potentially eyeing the 50% level. Conversely, a resurgence of upward momentum could revive interest around the 7665.0 level, offering a short-term focal point.
Summary
The CAC40 Futures’ recent record-breaking surge amid a global equities rally reflects market optimism bolstered by dovish Fed expectations and economic indicators. While perched in an ascending channel, the index faces crucial support at 7322.5 and resistance at 7665.0. Technical cues hint at potential momentum shifts, steering traders’ focus toward pivotal levels in an ever-evolving landscape.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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