Dax Rallies As Middle East Tensions Ebb

Dax has started Tuesday on firmer footing as sentiment improved surrounding the US – Iran flare up

Dax has started Tuesday on firmer footing as sentiment improved surrounding the US – Iran flare up. Even though Iran continue to threaten revenge for the death of a top Iranian general on the orders of Trump, markets are defiantly attempting to shrug off those fears. 

Demand for riskier assets such as equities are on the rise, whilst the safe haven trade is starting to look tired. 

Data from German has been encouraging so far this week.

  • German retail sales smashed analysts’ expectations jumping 2.1% mom in November, significantly up from October’s -1.6% decline. 
  • German service sector pmi also surprised to the upside calming fears of the ongoing manufacturing slump spilling over into the consumer sector. 
  • Today HIS/Markit data showed that the German construction sector expanded at the fastest pace in 9 months. 
There are certainly tentative signs that the slowdown in Germany is starting to bottom out. With the phase one trade deal expected to be signed between the US and China next week, there is also growing optimum that the German manufacturing sector, which is deep in contraction, could also be on the brink of turning a corner.

Euro weakness supports Dax
Despite the stronger data from Germany, Eurozone inflation ticking higher to 1.3% and eurozone retail sales increasing 2.2%, the euro remains on the back foot and below $1.12. The weaker euro is also offering support to the multinational exporters on the Dax.

Levels to watch:
The Dax jumped on the open and is trading 0.7% higher. The surge in the Dax has pushed it back above its 50 sma, giving the bulls the upper hand. Immediate resistance can be seen at 13280. A breakthrough here could open the doors to 13425 (2019 high).
On the downside support can be seen at 31188 and the 50 sma at 13157. A breakthrough these levels could see the Dax drop to 12884.

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