Key Talking Points:
- DAX 30 sinks further ahead of ECB meeting
- Oversold conditions at highest since October 2020
The DAX 30continues to pull back from recent highs as markets are left in limbo trying to figure out the next move. The reopening trade continues to make headway as more countries attempt to return to normalcy but there are still major concerns about growth which is keeping momentum capped. The response of central banks to current price pressures is also a key focus for markets as they fear that a premature relaxation of monetary stimulus could hinder economic recovery.
We’ve already seen some members of the Federal Reserve and the Bank of England become more hawkish and it’s the ECB’s turn to deliver its latest guidance on Thursday. I don’t think there is much risk of a change in policy at this meeting, especially as the bank recently revised its inflation guidance to better reflect the economic situation in the Eurozone, removing the 2% ceiling for inflation and allowing for the economy to flourish before restrictions to growth are put in place. That said, we could see the ECB coming off a bit more hawkish in their comments as price pressures continue to rise, which could put further pressure on the DAX 30.
DAX 30 Daily chart
The pullback in the DAX 30 has intensified since it started last week heading towards a two-week low at 15,280. The stochastic oscillator is at its most negative since October 2020 with the MACD pulling deeper into the red, so we may see some short-term support around 15,300 to undo some of the oversold conditions before the selloff intensifies further. The drop below the ascending trendline has made it tougher for buyers to consolidate momentum so ideally the index would have to trade back above 15,700 to consider further bullish bias. There is risk of sellers taking control if the DAX 30 falls below the 15,000 mark.
| Change in | Longs | Shorts | OI |
| Daily | -17% | 0% | -6% |
| Weekly | -19% | 4% | -4% |
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
