DAX, German stocks, Brent crude oil, Ukraine, Russia – Talking Points:
- German DAX stock index sharply higher, eyeing 2022 trend resistance
- Narrowing Brent crude oil futures spread flags easing Ukraine worries
- Retaking former range floor needed to neutralize overall bearish bias
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Germany’s DAX stock market index has roared higher for the better part of the past two weeks having tagged the weakest level since November 2020. The move has played out inversely to a narrowing of the spread between front- and second-month Brent crude oil futures.
The narrowing of the Brent spread suggests that worries about supply disruptions linked to the ongoing war following the Russian invasion of Ukraine have started to ebb. This comes against the backdrop of cautious soundbites hinting that ceasefire talks between Kyiv and Moscow might be making a bit of progress.
This is as expected. Russia’s move to broaden the fight after early setbacks derailed an attempt at something faster and more surgical seems mostly like scrambling for leverage before the full sting of Western economic sanctions makes earnest negotiations inevitable.
Chart created with TradingView
The move’s durability now faces a key test at support-turned-resistance in the 14795-15046 zone. This marks the range floor that defined DAX price action from May 2021 to just about a month ago, when it finally gave way. A daily close above it would entail a break of the downtrend this year’s early-January high.
Near-term selling pressure will appear to have been neutralized in this scenario, putting resistance at 15842 in focus along the way to the double top at 16295. The rally may yet prove to be corrective, however. If resistance holds, the first layer of key support comes in at 14046. Breaching it eyes 13637 and 13305 next.
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--- Written by Ilya Spivak, Head of Greater Asia at DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
