Talking Points
- DAX is nearing my target of 11k and I would expect it to rally further in the days ahead following Friday’s good NFP print
- Both Euro-Zone Sentix Investor Confidence and German Industrial production disappoint
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The break to the intraday high of 10,808 in Friday’s session and the 210k rise of U.S. Non-farm payrolls has left the DAX with a short-term bullish bias above Friday’s low of 10,630. I would expect the DAX to reach 11,000 here and then move to 11,250 over the next few days provided the low holds.
Short-term traders that are not already long will probably seek long positions within the 10,725 to 10,855 range. The trend is one of bullish bias above Friday’s low of 10,630.
Looking beyond the near term and even if Friday’s low were to fail to hold, the medium term trend will not fail until the DAX index breaches November’s low of 10,483. If 10,483 fails to hold as a support, price may slide to 10,200 and 10,000 over the coming weeks. However, stock markets tend to be strong at this time of year, hence, it is not my base scenario despite the ECB failing to deliver the amount of stimulus which the market expected.
Euro-Zone Sentix Investor Confidence Disappoints
Euro-Zone Sentix Investor Confidence, much like the German ZEW Expectations index, exhibits a positive correlation to the German DAX year-on-year returns and therefore, we watch it. The outcome for December was 15.7 which was lower than the 17 projected by economist consensus. However, it was higher than the November reading of 15.1. The market has so far shrugged off the report, which makes sense given that Friday’s U.S. NFP carries a higher weight.
In other news, German Industrial Production increased by 0.2% MoM, which was lower than the 0.8% projected by a Bloomberg poll. While this is less good than expected, most of the decline can be explained by drops in energy production and the fact that German PMI’s have been rising as of late, making a reasonable case for the market to ignore this data for now.
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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