DAX30 in nose-dive mode, 10,600 points in focus

March 09, 2020 10:30

Source: Economic Events March 6, 2020 - Admiral Markets' Forex Calendar

While the economic calendar is quite thin this week, the strong risk aversion leading up to last week's close should keep volatility elevated in the German DAX index.

What seems particularly alarming is the very weak reaction to the Fed emergency rate cut last Tuesday.

Last Tuesday morning, an emergency G7 phone call, led by US Treasury Secretary Mnuchin and Fed Chair Powell, didn't result in any plans of coordinated action by the G7, in regards to fiscal stimulus or a coordinated rate cut by central banks. There was only some vague rhetoric that they are to carefully watch upcoming developments in the Coronavirus and its impact on the global economy. Meanwhile, the Fed, several hours later, cut rates by 50 basis points.

But Equity markets (and thus the DAX) only saw a short term upward squeeze, which sold off sharply as 10-year US Treasury yields dropped significantly below 1.00% over the last days.

In fact, market participants now expect the Fed to cut rates by another 50 basis points at their meeting next Wednesday, and the ECB is also expected to be extremely dovish next Thursday by cutting rates by a minimum of 10 basis points into negative territory.

But with Equities failing to gain bullish momentum in regards to liquidity, the advantage stays clearly on the downside, with the focus in the DAX30 CFD on the region around 10,600 points.

On the upside, only recapturing 12,200/230 points would, at least in the short-term, brighten the technical picture:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between February 19, 2020, to March 6, 2020). Accessed: March 6, 2020, at 10:00pm GMT

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between November 22, 2018, to March 6, 2020). Accessed: March 6, 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%.

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