German government brings out the stimulus, but DAX fails to recapture 10,000

März 16, 2020 10:30

Source: Economic Events March 16, 2020 - Admiral Markets' Forex Calendar

Last trading week saw massive volatility, starting with "Black Monday" due to both Coronavirus fears and oil prices collapsing due to Russia resisting Saudi Arabia's push for deeper production cuts at the OPEC meeting in Vienna.

Thursday became a "Black Thursday" of sorts after the monetary stimulus from the ECB went nowhere, and market participants being concerned about US president Trump's (surprising) travel ban from Europe to the US, resulting in the sharpest equity drop since the 'real' Black Monday on October 19, 1987.

As the week approached the close, signs point to a massive monetary stimulus in anticipation of a global economic downturn and recession, governments are also trying to fight Coronavirus induced recession fears.

The German government delivered a bomb by announcing billions of Euro to cushion the economy, with plans to set up a safety net for companies and no limit on credit programs.

As a result, the DAX30 CFD rallied sharply, gaining as much as 9% on the day, but gave back all of its gains in the hours later that day - a very weak sign.

Similar measures from other governments, especially European ones, should probably be expected. Short positions should be taken very cautiously, even though the overall advantage stays on the Short-side.

Technically, the Short sequence stays given as long as the DAX30 CFD trades below 11.000 points, drop below 9,000 points is clearly on the table with a potential target being found around 8,700 points, while a potential Short-trigger is technically found around 10,200 points:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between February 26, 2020, to March 13, 2020). Accessed: March 13, 2020, at 10:00pm GMT

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between November 28, 2018, to March 13, 2020). Accessed: March 13, 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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