***I will be out of the office travelling to Germany today. The next update will be on Wednesday 20th May***
The DAX has continued to climb higher after dovish comments from the ECB. Yesterday, ECB president Mario Draghi gave a speech to the IMF in Washington. As mentioned in yesterday’s article, traders would be looking for any comments on the Euro situation especially with the ongoing Greek debt repayment saga. Some investors have deliberated as to whether the ECB would pull the plug on it’s €60 Billion a month bond-buying program earlier than the targeted September 2016 due to the recent string of upbeat economic data in Europe.
Needless to say these concerns were quashed as Draghi reiterated that the ECB is committed to implementing its €1.1 Trillion asset-purchase plan “in full,” and “in any case” until inflation has recovered lastingly. But the most salient remark that stood out for me was “our monetary policy stimulus will stay in place as long as needed for its objective to be fully achieved on a truly sustained basis.” – read the full article here.
In today’s session, traders will be watching for data releases out of the U.S. This includes industrial production for April and the University of Michigan’s preliminary May reading on consumer sentiment. The data may help deliver a clearer picture as to the ongoing debate over when the Fed will raise interest rates based on the strength of the U.S. economy.
Looking at the Hourly chart of the DAX below, one can see that bulls finally took back control in trading yesterday, predominantly down to Draghi’s comments. The price managed to recapture the Hourly 200 moving average (green line in the chart below) and in quick succession reclaimed the Hourly 100 MA (blue line).
(click to enlarge)
CONCLUSION – BULLISH
Price now needs to stay above the Hourly 200 MA for this bias to remain in place.
For bulls, the next important resistance areas up ahead to clear are the downwards sloping trendline in place since the highs of 11407 back on the 13th April, which comes in around the 11642 area. After that 11670 and then the 11776/11751 zone. This zone is pivotal for bears. Price collapsed below this area on the 29th April and has not managed to break above since. If price breaks through that we then have 11800, 11812 and the 11858/11842 zone. Then it’s 11931, 11975, 12015,12051. The DAX has been in the habit of surging way beyond it’s average 22 day trading range over the last few weeks, so it’s always good to have profit taking levels in mind.
For bears, price needs to get back below the Hourly 200 MA and ideally the 11457 level. Alternatively, bears can short into rallies on the bullish targets mentioned above, most notably the 11776/11751 area.
Bearish targets:-
- 11551 (Daily low)
- 11467/11457 zone (close to Daily Pivot of 11454)
- 11361 (Extension of Daily range – avg.22 day range is 276 pips)
Bullish targets :-
- 11776/11751 zone
- 11827 (Extension of Daily range & close to Daily R2 Pivot of 11823)
- 11858/11842 zone