The DAX continued to move lower in yesterday’s trading as comments from Greek Prime Minister Alexis Tsipras regarding a referendum damned spirits amongst investors. He ‘warned that he would hold a referendum if international creditors insisted on a “vicious circle of austerity” as the key to unlocking urgently needed bailout money’ – see full article here.
The DAX was also hit hard by the news of Commerzbank. Germany’s second biggest bank dropped over 5% yesterday after it launched a share sale to raise €1.4 billion from institutional investors to bolster its capital – see full article here.
Today in Europe we have Greece who is expected to present draft reform legislation to lenders, in a bid to show it is serious about acting on pledges to secure aid. Meanwhile in the U.S. we have the F.O.M.C. statement at 19:00 GMT. All eyes will be on the timing of an interest hike. Some investors and a few economists are already factoring in a delay of Interest Rates rising due to weak economic data during the quarter. First quarter GDP growth was consistently revised down for instance. If the Fed are still deliberating over June, September or December for a rate hike, then look for clues as to the Fed’s outlook on the Economy. If they hold a dim or cautious view on growth, this will indicate a hold on rates. Such a dovish stance will lead to markets rallying.
Looking at the Hourly chart of the DAX below, one can see price is back below the Hourly 100 MA. My Bullish stance was thwarted yesterday as price dropped below the 11840 area. As also stated, going short was the next plan of attack and taking profits into the next resistance zone of 11750 was the wise choice to neutralise any losses for the day, and even end up in profit.
(click to enlarge)
CONCLUSION – NEUTRAL
If one is inclined to have positions open going into the news, be sure to have very tight stops. However, it is worth noting such events can create liquidity risks in the market, so price may not be filled at your required level by your broker. Therefore, the safest stance for one to take is to sit on their hands, so to speak, until 19:00 GMT this evening when the F.O.M.C. minutes are released.
For bulls, leaning against the 11750 zone is one approach and for those risk averse, buying on a close above the Hourly 200 MA (green line in the chart above) currently at 11865 is another. Targets going into 12051, 12110 and the 12189/12225 zone.
For bears, price needs to get below the 11750 zone and stay there. The next targets would be 11671, 11631 and the 11606/11595 zone. The line in the sand for bears today will be the Hourly 200 MA/downwards trendline area. If price holds above this levels, shorts should reassess their market bias.
Bearish targets:-
- 11671 (Recent low)
- 11606 (Big resistance zone)
- 11565 (Daily S2 Pivot)
Bullish targets:-
- 12051 (Recent high)
- 12110 (61.8% retacement from April 10th)
- 12189 (Big resistance zone & close to Daily R2 Pivot of 12185)