DAX Index Breaks Trendline Resistance on Optimism That Central Banks Would Take Action

Dax Index
Dax Index

After being down by 10.64% in last week’s trading, the DAX Index is off to a bullish start to this week’s trading. Germany’s stock index opened 1.5% higher today. If the performance of the Asian equities markets are an indication of how the DAX Index will perform, we will see it finish the day in the green.

There is a general sense of risk appetite in the financial markets today. This is triggered by speculations that central banks all over the world would soon take a concerted action in order to stimulate economic growth. The coronavirus outbreak has caused disruptions across multiple industries and threatens global output. Data from China, the epicenter of the infection, has already shown signs that economy has been hard-hit by the disease.

It is widely-expected that central banks would announce rate cuts, beginning with the RBA tomorrow. The BOC is then expected to follow suit and would be succeeded by the Federal Reserve.

Leading today’s gains is Wirecard which is up by 4.09%. In second is Fresenius Medical Care at 2.77%. Meanwhile, car-maker Volkswagen is in third at 2.68%.

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DAX Index Outlook

On the hourly time frame, we can see that the short-term downtrend on the DAX Index seems to have been broken. By connecting the highs of February 21, February 26, and February 27, we can see that resistance at the falling trend line has been broken. The stock index has retraced some of its gains back to the 38.2% Fib level (when you draw from Friday’s low to today’s high) and re-tested the trend line for support. Reversal candlesticks around 12,000.0 could mean that the DAX Index may soon rally to 12,560.0 where it topped on February 27.

On the other hand, a close below 11,940.0 may invalidate this bullish assumption. Instead, it could mean that the DAX Index could fall to support at 11,695.0.

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