Is the DAX30 currently waiting in the calm before the storm, below 8,000 points?

Marec 23, 2020 10:30

Source: Economic Events March 23, 2020 - Admiral Markets' Forex Calendar

Selling pressure on the DAX30 CFD remained high over the last week of trading, despite the massive monetary stimulus from the Fed on March 15, cutting rates to 0.0%-0.25% and launching a massive QE program of USD 700 billion, and by announcing swap lines with global central banks to make sure that enough USD is available and cutting reserve ratios for banks to 0. It also didn't shift despite the massive monetary stimulus announced from the ECB on Wednesday evening.

The ECB went "all in", launching a 750 billion euro emergency bond purchase scheme in a bid to stop a pandemic-induced financial rout from shredding the euro zone's economy.

Still, the German index saw a solid weekly close, and if bulls and indications intensify that, the DAX30 CFD may have found, at the very least, a short-term bottom.

While volatility should be expected to stay massively elevated, the main focus on the upside is at the region around 9,150/200 points, and a break higher would accelerate the bullish momentum, bringing a re-test of the region around 10,000 points into play.

Nevertheless, the re-installed swap lines of the Fed is especially noteworthy since the world has built an enormous pile of USD debt over the years (especially over the last decade with the massive Fed QE), where 12.8 trillion of USD debt can be found in the books of banks around the globe. And this US dollar shortage will likely continue and force market participants to keep on dumping their Equity positions with the target to stay as liquid as possible.

That said, we stay bearish for the DAX30 CFD for the time being, consider any bullish stints as short-lived and see a drop as low as 7,500/8,000 points as a serious option:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between March 4, 2020, to March 20, 2020). Accessed: March 20, 2020, at 10:00 PM GMT

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between December 5, 2018 to March 20, 2020). Accessed: March 20, 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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