China’s export sales contracted -15% in March versus expectations for a +12% increase. Chinese exports are generally seen as a good economic indicator for the status of the global economy. The fall in exports, which is the worst in about a year, is a result of lower demand and a heightened Yuan.
Let’s not forget the ECB has embarked on a massive money printing program which has the effect of devaluing the Euro against other currencies. As the E.U. is one of China’s biggest trading partners the outcome will ultimately be reflected in Chinese trade figures. The Yuan is up almost 14% against the Euro YTD. Chinese solution? For the PBOC to further ease its monetary stance. The People’s Bank of China cut benchmark interest rates for the second time in three months on March 1, citing low consumer prices. In February, it trimmed the reserve requirement ratio – the amount of money banks must keep on hand – by 50 basis points. No doubt the markets are beginning to factor this possibility in as equity indices have seemed little unfazed in trading today. The Shanghai Composite Index advanced by 2.2% to 4,121.71, its best close in more than seven years.
Looking at the Hourly chart of the DAX below, one can see the market has retreated a little from the high set in today’s Asian session at 12407. The low for the day coming in at 12332 which is just above the Daily Pivot at 12326 and the 38.2% price retracement of Friday’s move coming in at 12324.
(click to enlarge)
CONCLUSION – BULLISH
The Index has only travelled 75 pips in trading today versus the average of 204 pips over the last 22 days. So there is plenty of room to roam either to the upside or downside. However, looking at the Hourly and 5 min charts my bias would be bullish. On the Hourly, the first two candles in the london session have long wicks, implying price tried to push lower but to no avail, as buyers stepped in at lower prices, forcing the market back higher. When price starts to sell-off, traders look for a continuation of this momentum – shorting any retracements. Looking at the 5 minute chart below, ample shorting opportunities would have been into the 100 & 200 moving averages (blue and green lines). However, price is lingering at these levels, which weakens the bearish conviction present this morning.
For bulls, buying opportunities reside on breakouts of the all time high at 12407. For the more risk averse – at dips into the current Fib levels, 12324, 12298, 12273. Below that, the 12222 level, which was once resistance, is now support.
For bears, shorting opportunities reside against the 12407 level or on a close below the 12200 area.
(click to enlarge)
Bearish targets :-
- 12300
- 12252 (Daily S1 Pivot)
- 12196 (Bottom end of 12200 zone)
Bullish targets :-
- 12460 (Daily R1 Pivot)
- 12500
- 12536 (Extension in daily range & close to Daily R2 Pivot of 12535)