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DAX 30 Forecast: Indecision Creeps in as ECB Promises Disappoint

DAX 30 Forecast: Indecision Creeps in as ECB Promises Disappoint

Daniela Sabin Hathorn,

Key Talking Points:

  • The ECB meeting failed to offer much of note for investors expecting further action to control borrowing costs
  • DAX 30 shows indecision as bears take control at the 14,600 resistance
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The DAX 30 is showing indecision on the daily chart after yesterday’s uneventful ECB meeting. Thursday’s candlestick on the German index chart is showing how bullish investors were disappointed at the lack of commitment from the central bank to curve the rise in bond yields, despite continuing to promise low financing conditions in the near future.

The main takeaway from the meeting was “ECB expects purchases under PEPP over next quarter to be conducted at a significantly higher pace than during first months of this year” but this continues to disappoint investors that wanted more specifics. We did see the German bund yield retrace slightly on the back of this, but it is now sitting around the level seen on Tuesday after rebounding slightly, mostly due to leaked sources from the ECB stating that not all of their policymakers agree on whether the rise in yields needs to be completely unwound, adding further confusion to the mix.

German and US 10Y Yield Chart (Jun 2020 – Mar 2021)

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In the US the theme is pretty similar and bond yields are on the rise again after a few days of pullbacks. The US 10 year yield is above the high seen on Monday, sitting around 1.603, which is the highest level since January 2020, as the Federal Reserve is also being cautious about committing to any policy action changes in search of the highest flexibility possible.

DAX 30 Levels

So this lack of assurance from central banks continues to concern investors, which is showing in European indices this morning. The DAX 30 was down 0.7% at one point this morning after yesterday’s candlestick painted a clear sign of indecision, meaning that buyers and sellers are battling to take control. Because of this, today’s candlestick will be important to gauge overall sentiment in the DAX, as a sustained bearish break lower could mean that 14,600 is a strong resistance area and a short-.term top.

If so, 14,300 is likely a good place to look for short-term support, followed by the 14,140 area. If, alternatively, bulls have managed to reverse the losses by today’s close, expect to see the DAX 30 attempting to break above 14,600 during the next week, at which point resistance areas are hard to pinpoint but overbought conditions will deepen and are correction will likely be overdue.

DAX 30 Daily chart

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Germany 40 Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -9% -1% -3%
Weekly 0% 6% 5%
What does it mean for price action?
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--- Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin

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

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