DAX extends rally ahead of ECB
Fawad Razaqzada September 7, 2017 12:21 PM
European stock indices stormed higher yesterday and have extended their gains this morning ahead of the European Central Bank rate decision and press conference today.
European stock indices stormed higher yesterday and have extended their gains this morning ahead of the European Central Bank rate decision and press conference today. The main focus will be on whether or not the ECB would announce a plan to taper its QE programme, and any comments about the euro, which has climbed to multi-year highs against a number of foreign currencies. If the central bank turns out to be more hawkish than expected then we could see some further strength in the euro and export-oriented European stocks may fall, which could be bad news for the German DAX in particular. However, judging by the “ECB sources” headlines that have been hitting the wires over the past couple of days, the Mario Draghi and co may delay a decision on QE until the ECB’s next meeting in October. If so, the euro could fall, pushing European stocks further higher.
As far as the DAX is concerned, well it has spent several weeks trying to form a base around the key 12000 area. It looks like that process has now ended and is time for range expansion to the upside again – provided the ECB does not trigger a fundamental-based sell-off this afternoon. From a purely technical perspective, however, the German benchmark has formed several bullish signals: (1) a false break reversal pattern below prior support at 11941, (2) break out from its bull flag, (3) reclaiming of both the 50 and 200-day averages and (4) clearing of resistance in the 12210-60 region. This 12210-60 is now the key support zone to watch – any move below this region and the bullish view would have to be put on hold again. Meanwhile in terms of resistance, the old all-time high prior to this year’s record was at 12390. As we are currently below this level, we may see some volatility around here. Further higher, the next bullish objective would be around the 12535-12590 area which was previously support and resistance, and where the 61.8% Fibonacci retracement level against the all-time high (12951/2) converges.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.