Dax index started higher on Thursday after the proposal for the EU coronavirus recovery fund. The EU Commission proposal that includes 250 billion in loans and 500 billion in grants which would be handed out as grants to the worst affected European countries hit by the coronavirus crisis. There will also be other measures as new taxes and levies on tech companies, and single-use plastics, in the upcoming years. The proposal offers a strong signal for the unity of the EU.
My concerns are that even the amount of funds is above the expectations it will not be enough to cover the total damage, and also the money will not be immediately available.
Meanwhile, tension rise between USA and China over the Hong Kong security law. Chinese administration will introduce a national law that bans treason, secession, sedition and subversion of the central government in China. The move might spark a new round of pro-democracy protests and a stand-off that we saw last year. Hong Kong administration in a move to calm investors said that the new law would not alter the civil liberties.
The House of Representatives yesterday passed legislation for sanctions against Chinese officials for the detention of Uighur Muslims. China’s Foreign Ministry warned that it would retaliate against any sanctions imposed.
Dax index getting a boost from Lufthansa +2.72% at 9.50, Deutsche Bank +1.73 at 7.93, Deutsche Telekom +1.14% at 14.26 and Vonovia +1.16% at 50.70
Dax index is 0.57% higher at 11,724 a level that we haven’t seen since March 6th, as the rebound from the March lows as the index yesterday breached above the 100-day moving average. The technical picture has improved now for the medium term, and higher levels might be on the cards as long as the index holds above the 100-day moving average. The longer-term outlook remains bearish below the 200-day moving average.
On the upside, immediate resistance for the Dax index stands at 11,750 the daily high. A move above 11,750 would target 12,105 the 200-day moving average. A break higher might challenge 12,211 the high from March 5th.
On the other side, initial support for the Dax index stands at 11,685 the daily low. In case the index breaks below, then the next support is at 11,575 the 100-day moving average. Below 11,575 the next support area will be met at 11,105 the low from May 25th.