Coronavirus pushes the DAX down to 12,000 points – what’s next?

March 02, 2020 09:30

Source: Economic Events March 2, 2020 - Admiral Markets' Forex Calendar

The tide dramatically turned in Equities over the last week of trading, as a massive risk-off hit global financial markets. This came from new Coronavirus information and clear signs of a widespread health threat.

In this context, 10-year US yields hit new all-time lows and the DAX30 CFD broke below 12,000 points, technically negating the long sequence on a daily time-frame by sustainably breaking below 12,900 points, and substantially dropping below its SMA(200).

In general, we should expect volatility to stay elevated, with the overall advantage being on the short-side in the coming days, since the worst is probably yet to come after the US CDC announced that it wants to prepare the American public for the possibility that their lives will be disrupted in the as the Coronavirus spreads.

Technically, the mode is very extended on the downside, and a sharp bounce is an option, making risk-reward ratios for short engagements less attractive. That said, the bullish divergence in the RSI(14) on an hourly time-frame points to diminishing bearish momentum, which could play out if any news or rumours on bigger fiscal stimulus packages make the rounds to limit a potentially larger global economic downturn.

Still, the DAX30 CFD stays technically bearish below 12,780/800 points, finding a potential Short-trigger around 12,370/400 points:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between February 12, 2020, to February 28, 2020). Accessed: February 28, 2020, at 10:00pm GMT

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between November 15, 2018, to February 28, 2020). Accessed: February 28, 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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