DAX Index Trades Higher Following the BOE’s Rate Cut; Can Merkel Help It Sustain Its Gains?


The DAX Index is trading slightly higher in today’s European session by 1.95% or 205.050 at 10,683.000 following the BOE’s rate cut earlier.

In a surprise announcement, the Bank of England (BOE) followed the Fed’s suit by cutting its official cash rate by 50 basis points. This is bullish for stocks because it means that there would be more liquidity to go around the UK economy. Consequently, the DAX Index benefitted on expectations that a more resilient UK economy would also benefit the German economy.

Later this morning at 10:30 am GMT, German Chancellor Angela Merkel is scheduled to give a press conference on the coronavirus. She has already warned that 60%-70% of Germans may become infected by the coronavirus. If she announces fiscal stimulus measures, it could help the DAX Index sustain its gains.

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DAX Index Outlook

On the monthly chart of DAX Index CFDs, we can see that a double top chart pattern has formed. This is characterized by a market that gets rejected at the same price level, twice. Hence, its name. For the DAX Index, that price was 13,500.0. It first tested the level on November 2017 and again early this year. This chart pattern is considered as a bearish reversal pattern. This means that break below the neckline support at 10,300.0, where the DAX Index bottomed today, could trigger a sell-off. Near-term support is at 9,240.0 where the index established lows in 2014 and again in 2016.

Alternatively, the DAX Index may also find support at the neckline which also coincides with the 100 SMA. Reversal candlesticks around its current price at 10,700.0 could mean that it would soon make its way to near-term resistance at 11,900.0.

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