In London on Monday evening, ECB executive board member, Benoît Cœuré, said the ECB would front-load some of its asset purchase program in May and June to help compensate for the lower volatility in July & August. This caused the Euro to plummet on Tuesday and consequently the DAX to rally, due to the inverse relationship as a result of cheaper German exports. – read full article here.
The European Central Bank helped push the DAX and other european markets even higher off remarks from another ECB member. Governing council member and Governor of the Bank of France, Christian Noyer, speaking at a Euromoney conference in Paris on Tuesday stated , “The purchase program will continue until the end of September 2016 and beyond if we do not see a sustained adjustment in the path of inflation,” – read the full article here.
In the Asian session today, data released for Q1 2015 showed that Japan’s economy grew at the fastest pace in a year. The world’s third largest economy grew at 2.4% vs expectations of 1.5% pushing the Japanese stocks to the highest level in 15 years. – read full article here.
Later today the FOMC minutes will be released at 19:00 GMT. The ongoing saga around the timing of a U.S. interest rate hike from the Federal Reserve Bank will be on the minds of traders and investors alike. Regular comments have been made from FOMC members stating it is data dependent. Markets rallied in the U.S. yesterday as data released showed U.S. housing starts rose to their highest level in over 7 years in April. What will be in the report released today? Will comments from other members give clues? Chicago Fed president Charles Evans said “Policy should be sufficiently accommodative so that … the odds should favor modestly overshooting our 2% target sometime in the medium term,” a remark prepared for delivery in Munich at a symposium of the National Association for Business Economics. He also hinted that an interest rate hike would not be appropriate until 2016. – read full article here
So positive sentiment continues to pump Global equity markets higher. Where to next for the DAX? Let’s have a brief look at the Daily chart to see the longer term picture. As was mentioned in my article from the 30th April, the 11316 level & Daily 100 moving average (blue line in the chart below) was key. Looking at the Daily chart of the DAX below, one can see price failed to close below the 11316 level and subsequently held against the 100 MA when price tested this area.
(click to enlarge)
Looking at the Hourly chart of the DAX below, one can see price finally broke through the downwards trendline on Monday ,which has been in place since the 10th April. Traders then attacked the 11751/11776 level with force and succeeded in yesterday’s session, with price holding against this zone on a retest.
(click to enlarge)
CONCLUSION – BULLISH
Price is overextended from it’s Hourly 100 & 200 MA’s (blue & green line in chart above), but the overall sentiment in the market as aforementioned can’t be ignored. The FOMC minutes released later today, could cause the DAX to roll over, but expect value investors to step in at key zones.
For bulls who are risk averse price needs to clear through the 11858/11842 zone. This area has been tested on several occasions yesterday & today but price has failed to close above this level. If price does manage to break out traders will be taking profits off the table at the key prices marked as red horizontal lines on the Hourly chart above & Bullish targets mentioned below. Alternatively, traders can define their risk at key levels on any pullback in price. These being the 11776/11751 & 11606/11595 zones.
For bears, traders can define their risk against today’s high of 11882, the 11858/11842 zone, a break of 11751. For risk averse bears, price needs to reclaim the Hourly 200 MA, currently 11568.
Bearish targets :-
- 11751 (Key zone)
- 11610 (Extension of Daily Range – 22 day average is 270 pips)
- Hourly 200 MA
Bullish targets :-
- 11915 (Daily R1 Pivot)
- 12020 (Daily R2 Pivot)
- 12050 (Extension of Daily range)