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DAX 40 Recovers as Risk Sentiment Sways Markets Ahead of Fed Meeting.

DAX 40 Recovers as Risk Sentiment Sways Markets Ahead of Fed Meeting.

Daniel McCarthy, Strategist

DAX 40, Twitter, ASX 200, PBOC, AUD, NZD, CAD, BOC - Talking Points

  • DAX 40 boosted by risk recovery as global equities lift
  • China’s PBOC makes a move to improve sentiment, cutting RRR
  • A gagged Fed may have created a risk vacuum, will DAX 40 benefit?

The DAX 40 appears set to recover all of Monday’s losses on Tuesday as risk assets turned around.

US stocks were under the pump early yesterday but turned around toward the close after Europe had gone home to finish up for the cash session.

With the Federal Reserve in a media blackout ahead of their May meeting, an absence of hawkish rhetoric has the market potentially more comfortable with risk assets.

Elon Musk’s record breaking US$ 44 billion leveraged buy-out of Twitter got the blessing from the company’s founder, Jack Dorsey.

APAC equites have recovered some of Monday’s losses and are all in the green, with the exception of Australia’s ASX 200, which is down on the day after a holiday Monday.

The Peoples Bank of China (PBOC) cut the reserve ratio requirement (RRR) for banks to 8% from 9%, taking effect from May 15th.

The cut was made as the Covid-19 shut-down consequences continue to reverberate. Data is showing shipping lanes clogging up ever further, choking global supply chains and dampening growth prospects.

Concerns of a China slowdown saw risk assets under pressure to start the week, but they have recovered some of the lost ground to varying degrees to start Tuesday.

The Aussie and Kiwi were both victims of the Monday sell down but have recovered to be back above 72- and 66-cents respectively.

The Canadian Dollar saw similar price action that was aided by Bank of Canada Governor Tiff Macklem making hawkish remarks overnight. He hinted that more 50-basis point hikes might be on the cards.

Crude oil recovered, the WTI futures contract is around US$ 99.50 bbl and the Brent contract near US$ 103.50 bbl at the time of going to print.

Japanese employment data was a slight beat with the jobless rate coming in at 2.6% instead of 2.7% expected. The Yen was little changed, holding onto Monday’s gains.

Later today, the US will see durable goods orders, consumer confidence data and new home sales numbers for March.

The full economic calendar can be viewed here.

DAX 40 Technical Analysis

The DAX 40 rejected an attempt to break lower yesterday and has recovered to be trading back within the 13897 – 14945 of the last month.

These levels may provide support and resistance respectively, the latter coincides with the 100-day simple moving averages (SMA).

The consolidation has seen the 10-, 21- and 55-day SMA begin to cluster just above the price and significant move away from these SMAs in either direction could be a clue to momentum unfolding.

DAX 40 CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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