DAX 30, Coronavirus Infections, German National Lockdown, Vaccinations, IGCS – Talking Points:
- In particular, the appetite for risk has strengthened during the APAC exchanges as attention turns to FOMC meeting later this week.
- The notable drop in coronavirus infections in Germany could support regional asset prices.
- DAX 30 The index is poised to continue to gain ground as price consolidates above key support.
Equity markets rose significantly during Asia-Pacific trade, with appetite for risk strengthening in particular, thanks to hopes for fiscal stimulus and the expectation of continued monetary policy support from the Federal Reserve. Australia ASX 200 the index climbed 0.36% while that of Japan Nikkei 225 increased 0.67%.
Hong Kong’s Hang Seng Index jumped 1.75% as investors flocked to buy shares in tech company Tencent, as the stock climbed 10%. In the foreign exchange markets, AUD, NZD, GOUJAT and NOK significantly outperformed, while USD, JPY and CHF lost ground against its main counterparts.
Looking ahead, business climate figures in Germany for the month of January are making the headlines in the economic newspapers alongside a speech by European Central Bank President Christine Lagarde.
Flatten the viral curve to support DAX 30
The notable decline in coronavirus infections in Germany could support the benchmark DAX 30 in the near term, despite the government’s revised downward forecast for economic growth in 2021. The imposition of a national lockout at the end of November had a drastic effect on the local economy, with the Markit Composite PMI for January falling to 50.8 (prev. 52).
Indeed, Chancellor Angela Merkel’s decision to extend restrictive restrictions has led the government to downgrade its growth forecasts for 2021 from 4.4% to 3%. This reflects the deterioration of economic and health outcomes across the euro-zone, as the trading bloc moves into a double-dip recession.
However, with the 7-day moving average following Covid-19 cases dropping to its lowest level since late October and the vaccination rate climbing upward, there may be a burst of light at the end of the tunnel. 1.63 million Germans have received at least one dose of the vaccine as of January 22.
In addition, the recent purchase of more than 200,000 doses of monoclonal antibodies could help to further suppress the epidemic. Health Minister Jens Spahn said that “injecting these antibodies can help prevent early stage at-risk patients from developing serious disease.”
Therefore, investors may reject the diminishing growth outlook and continue to favor the German benchmark DAX 30 in the near term.
Source – Worldometer
DAX 30 Index Futures Daily Chart – Higher Schiff Pitchfork Key Price
From a technical standpoint, the German benchmark DAX 30 looks set to continue its climb to new year-on-year highs, as price remains constructively perched above range support at 13730 – 13830.
With the RSI and MACD indicator hovering firmly above their respective neutral midpoints, the path of least resistance is skewed upward.
A daily close above the January 8 high (14138) is needed to signal the resumption of the primary uptrend and would likely allow buyers to challenge the 61.8% Fibonacci (14372). Obstacles that probably bring the 14800 mark in the crosshairs.
Alternatively, the collapse below the range support at 13730-13830 could trigger a short-term pullback to the old support turned resistance at the September high (13464) and the 50-day moving average (13515) that defines the trend.
DAX 30 Index Futures Daily Chart Created Using Tradingview
IG Client Sentiment Report
the IG Client Sentiment Report shows that 35.63% of traders are net-long with the ratio of short to long traders at 1.81 to 1. The number of net-long traders is 6.36% lower than yesterday and 2.04% higher than last week, while the number of net-short traders is 5.17% lower than yesterday and 16.87% higher than last week.
We generally take a vexing view of crowd sentiment, and the fact that traders are net-short suggests DAX 30 prices could continue to rise.
Traders are even sharper than yesterday and last week, and the combination of current sentiment and recent changes gives us a DAX 30 bullish countercurrent trading bias.
– Written by Daniel Moss, Analyst for DailyFX
Follow me on twitter @DanielGMoss
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