CAC Continues its Correction on Weaker Consumer Confidence

Today’s Consumer Confidence for France came in at 90 with expectations of an increase to 91. The poorer than expected data added to the inflation and interest rate woes coming from the US.

The stock markets continue to feal the heat of a change in sentiment over the monetary policy in the US. Most major markets started the day in the red, including the NASADAQ down 0.65%. While the DOW extended its losses in the morning session, down 0.35%.

Other major European indices are also down with DAX losing 0.32% and the FTSE down 0.22%. The CAC is following, currently down 0.50%. The main concern the market is facing is the realization that rates may not be coming doing as quickly as hoped in the US.

According to the FME Fedwatch tool, using Fed Funds futures prices, the probability of a rate cut in September has shrunk from 49.4% 1 week ago to 41.7% yesterday. The rate cut from the EC for the next meeting in June is already well discounted by the market.

So, it’s going to take some extra good news to get the bulls back into control. A lot of insight will come from the next inflation data on Friday, when we get the inflation rate for the Eurozone, and PCE Price Index for the US.

Technical View

The day chart below for the CAC shows a bull market that is still in a correction. This retracement leg from point B and the previous, from point A, have given rise to a wide lateral trading range.

The two points A and B have created a double top and we will need to see a close above that level (red line) of 8,257 before we can consider a bull market back in action. The market broke into the Ichimoku cloud with today’s candle, where the next support will be the lower side of 7,914 (green line).

That support level also coincides with the support from a consolidation period on rally to the all-time high. The consolidation took place over two weeks across February and March, which makes it a particularly strong area.

ABOUT THE AUTHOR See More

Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.

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