Global equity markets were somewhat spooked throughout the Asian Session and into the European session as the PBOC (People’s Bank of China) devalued the Yuan by almost 2%. After the weekend’s abysmal Chinese Export data, investors would have been anticipating a move to kick the economy back into life. However, devaluing the currency causing the biggest one day loss in almost two decades was probably not on the cards. The effect will be a much stronger dollar, which ultimately throws the idea of a September Interest Rate hike by the Fed out the window. Full blown currency wars continues to trundle on – see full article here
My regular readers will be happy to see yesterday’s Bullish target call of 11622 was almost hit with price coming in at 11620. Whether or not my call today will be as prescient is debatable due to the volatility present, also look out for the German ZEW report at 10am GMT, a good economic indicator as to the overall strength of the German economy. Today’s report is expected to come in at 32 slightly higher than the previous reading of 29.7.
Looking at the Hourly chart of the DAX below, one can see price managed to get above the Hourly 100 moving average (blue line) before eventually meeting resistance at the key 11606/11595 zone. In trading today, the German index has sold off due to the unprecedented large-scale Yuan devaluation. In trading today the market has found some support against the 61.8% Fibonacci retracement level of yesterday’s move up coming in at 11502 + close to the key round level of 11500.
(click to enlarge)
CONCLUSION – NEUTRAL
My overall sentiment towards this market is still Bullish, however the large sell-off during the Asian session and potential miss on the German ZEW data could send the DAX lower. The Bullish bias will firmly return when price manages to reclaim the Hourly 100 MA. My bias will turn Bearish on an intraday timeframe if the Hourly 200 MA (green line in the chart above) is breached.
For Bulls, value investors will be buying dips into 11500, the 11467/11457 zone which also coincides with the Hourly 200 MA and upwards sloping trendline in place for the last two weeks. For risk averse, buying opportunities with defined risk are present on a break of the Hourly 100 MA.
For Bears, shorting opportunities will be into the Hourly 100 MA and 11620. For risk averse traders, price needs to break the yesterday low of 11430 with risk being defined just above the Hourly 200 MA.
Bearish targets :-
- Hourly 200 MA
- 11430 (Yesterday’s low + extension of Daily range 11438)
- 11364 (Daily S2 Pivot)
Bullish targets :-
- 11620 (Yesterday’s High)
- 11679 (Extension of Daily range + Daily R1 Pivot 11683 + 11670 last week’s High)
- 11776/11750 zone + Daily R2 Pivot 11750