Market News & Analysis
Where next for Dax?
Fiona Cincotta May 12, 2020 9:28 PM
The Dax has rallied 30% from its low of 8257 reached 19th March. It remains 20% off levels traded at the end of February. Whilst, the Germany economy is reopening as restrictive lockdown measures are eased fears of a second wave of covid-19 infections and growing US – Sino trade tensions could limit gains in the Dax as it approaches a key trendline dating back from 2011.
Germany is ahead of the game as far as easing lockdown measures go. The country has already opened shops, large and small, restaurants, bars and gyms. Germany is pressing ahead with easing lockdown measures despite the transmission rate, R, remaining over the critical threshold of 1 for a third straight day. If accurate it means that the number of infections are growing rather than falling, raising concerns of a second wave of infections. This could mean at worst a return to lockdown.
The Germany, the exporter nation has China and the US as its principal trading partner. As we saw in the first chapter of the US – Sino trade war Germany was particularly affected as global trade slowed.
The Dax is rising as tensions ese. However, more substantiated evidence of increased trade tensions could drag the Dax significantly lower.
As an exported nation, Germany is particularly sensitive to the global outlook. Signs that the global recession could be worse than initially anticipated could drag on the index and vice versa.
Dax Levels to watch
The DAX is trading 0.4% higher and remains above the ascending trendline from March low, a bullish chart. The Dax is also approaching a key trend line running from 2011 a breakthrough resistance of this trendline 11300 would be a strongly bullish signal.
Immediate resistance can be seen at 10976 (high 8th May) prior to the key psychological level of 10,000 prior to 11234 (high 30th April) and 11300. A move above this level could see a significant push higher.
On the flip side support can be seen at 10770 (trend line support) prior to 10421 (low 4th May) and 10230/10200 (15th April). A breakthrough at this level would tell us whether weakness is a pullback ahead of another drive higher or something more sincere and a move lower back towards he Marxh lows is on the cards.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.