The DAX continued to sell off in yesterday’s session after comments from the IMF. IMF chief economist Olivier Blanchard expressed “hope” that there will be an agreement with Greece. He commented the IMF is “preparing” for all possible scenarios and that a Greek exit would be no walk in the park for the eurozone.
In the Asian session today, data out of China has revealed Q1 GDP for 2015 YoY to be the worst for a single quarter since the first three months of 2009 during the global financial crisis. The world’s number two economy expanded 7% in the first three months of 2015. The figures are the latest to highlight a slowdown in the economy and will now increase expectations Beijing will announce more stimulus.
In today’s European session, the DAX has edged higher so far today off the back of data released this morning showing inflation in Germany crept higher in March. The consumer price index (CPI) rose by 0.3% YoY in March, up from 0.1% in February. The Harmonised Index of Consumer Prices (HICP), which the ECB focus on, rose +0.1% YoY in March, compared with a drop of -0.1% percent the previous month. Bear in mind this is Europe’s strongest economy, yet both numbers are way below the ECB’s target of 2%, which the central bank defines as price stability.
All eyes will be on the European Central Bank this afternoon, with their Interest Rate decision at 12:45 GMT followed by the press conference at 13:30 GMT. Expect some volatility around this time, as there may clues with regards to their QE program. Last week, Yves Mersch, the Luxembourgian member of the governing council, speculated that a faster-than-expected return to target inflation could see the ECB speed up its QE exit – read the full interview here.
Looking at the Hourly chart below of the DAX, one can see that in yesterday’s session price met strong support at the 12190. As mentioned in yesterday’s article, this area was a good level for the bulls to step in and buy with defined risk. Price failed to close below this level over two hourly candles, resulting in the DAX reversing and moving higher.
(click to enlarge)
CONCLUSION – BULLISH
The DAX failed to break below the 12225/12190 zone twice yesterday, and again twice this morning and is again rotating to the upside. However, be mindful of the ECB announcements this afternoon as any hint of alteration to the central bank’s QE kool aid could see the DAX sell off sharply.
For bulls, buying opportunities reside on a price break of 12333 and 12407. The price now needs to get above the 12333 level with conviction. This level was support on Monday, but became resistance yesterday, with price failing to close above this area on two hourly candles. If this area can be taken out, the next barrier becomes the all time high of 12407. For the more risk averse, buying opportunities with defined risk reside on a move back into the 5 minute 100&200 moving averages (blue&green line in the chart below) and the 12225/12190 zone.
For bears, shorting opportunities with defined risk reside at 12407 and break of 12190. However, a break of 12190 could be limited with a move to the downside, as the rising 200MA (green line in chart above) is not far below, currently 12141. There is also an upwards trendline at this area which has been in place since 26th March.
(click to enlarge)
Bearish targets :-
- 12190 (bottom end of 12225/12190 zone & close to Daily S1 Pivot of 12184)
- 12130 (Extension in daily range avg. last 22 days is 194 pips & close to Hourly 200 MA)
- 12100 (Key psychological area & close to Daily S2 Pivot)
Bullish targets :-
- 12345 (Yesterday’s high & close to Daily R1 Pivot of 12346)
- 12407 (Extension in daily range & all time high)
- 12428 (Daily R2 Pivot)