Dax index tumble in the open on Thursday starting with a huge gap down, amid the growing concerns of the coronavirus outbreak and a surprising move from President Trump that banned all travel from Europe. The World Health Organization (WHO) formally declared yesterday the spread of coronavirus outbreak (Covid-19) a pandemic. That triggered a selloff in Wall Street that send the major indices in bear territory.
The Kiel Institute for the World Economy, said that the German economy is likely to enter a recession due to coronavirus. The Institute expects Europe’s biggest economy to contract by 0.1% in 2020 due to the coronavirus before rebounding by 2.3% next year. The forecast was based on much uncertainty and on assumption that the coronavirus outbreak would ebb around mid-year.
Traders will focus on the ECB decision today, with expectations that the central bank would cut rates by 10 basis points as the deposit rate is already at -0.50% and will increase its asset purchase program as the Quantitative Easing program already stands at €20 billion per month.
Dax index is 7.07% lower at 9,699 today, as the index is 26.89% lower year today while it is 29.58% lower from the all time highs in mid February. The Dax technical outlook is clearly bearish and only a move that will close today’s gap down can give long positions a breath.
On the downside, the initial support for Dax stands at 9,676 the daily low. In case the sell-off accelerates the next support zone stands at 9,394 the low from July 7th 2016.
On the other hand, the initial resistance for Dax stands at 9,932 the daily high. A break above might test the 10,394 the low from yesterday’s trading session that will help close the today’s gap down. A credible close above might challenge 10,757 the high from yesterday’s trading session.