Just like its Asian counterparts, the DAX Index is off to a bearish start to this week’s trading. Germany’s stock index is currently trading 7.43% or 857.450 points lower at 10,684.420. Leading losses on the DAX Index is Deutsche Bank which is down 14.73%. It is then followed by BASF with a 10.07% loss. In third is Daimler at -9.38%.
News over the weekend that Saudi Arabia would be hiking its oil production led to an oil price war. The precedent of this move was the breakdown of the OPEC+ alliance. Last week, Russia refused more production cuts which was suggested by Saudi Arabia. Instead of working with the cartel to support crude oil price which has been weighed down by the coronavirus outbreak, Saudi Arabia now looks for a bigger market share. It announced that it would increase production to 10 million barrels next month. It also said that other countries are free to produce at their own will. Additionally, it began offering discounted prices to its oil.
Consequently, these developments sparked concerns about global politics as well as businesses related to the oil industry.
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DAX Index Outlook
On the monthly time frame, it can be seen that the DAX Index is testing a critical support level. By connecting the lows of October 2014, February 2016, June 2016, and December 2018, we can see that DAX Index CFDs is testing trend line support. This price, around 10,840.0, also coincides with its 2018 lows. Reversal candlesticks at this level could indicate that the stock index will continue its uptrend to near-term resistance at 12,000.0 (where it previously found resistance on April 2015).
Conversely, a strong bearish close below 10,275.0 would effectively break trend line support. It means that the DAX Index is no longer on an uptrend. If this happens, we could soon see it fall to its July 2016 lows at 9,300.0.