Disappointing ECB pushes the DAX30 back below 11,000 – further losses to come?

May 04, 2020 11:30

Source: Economic Events May 4, 2020 - Admiral Markets' Forex Calendar

After German DAX30 saw a short stint back above 11,000 points, it saw a sharp decline at the end of the last week of trading.

In fact, the bullish performance surprised us, given the US GDP data indicating shrinkage by an annualized 4.8% in Q1, ending the longest period of expansion in the country's history, with the steepest pace of contraction in GDP since Q4/2008 and much worse than market consensus of a 4.0% slump.

The squeeze back above 11,000 points was driven mainly by rumours that Gilead Sciences is approaching early results of a coronavirus drug trial which has shown improvement with a shorter Remdesivir treatment, fuelling hopes that we might be headed towards an effective drug treatment against Covid-19.

Still, the DAX30 closed the week significantly below 11,000 points after the ECB disappointed on Thursday by announcing that it will keep the size of its €750 billion "PEPP" (Pandemic Emergency Purchase Program) and "only" make available, once again, cheaper liquidity for European banks as part of its TLTROIII program.

In our opinion, a rough translation of these ECB measures to promise cheaper and more liquidity for European banks, but keeping PEPP untouched for now could be: "As long as no European unity in regards to a massive economic package to counter the economic Corona-lockdown induced downturn is delivered, we are not increasing the size of our PEPP package."

That in mind, it leaves room on the downside for the DAX30 CFD and even though we stay short-term and technically stay positive as long as the German index trades above 10,200 points, a sustainable drop back below 10,800 could trigger further weakness in the days to come:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between April 9, 2020, to May 1, 2020). Accessed: May 1, 2020, at 10:00pm GMT

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between January 16, 2019, to May 1, 2020). Accessed: May 1, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.