Talking Points
- The DAX 30 remains bearish below Tuesday’s high of 9774 and may break its 2015 low
- With ECB policy updated in December it is probably too early for the central bank to add more QE or cut rates
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The DAX 30 (FXCM: GER30) remains fragile and may slide lower in the sessions ahead as long as it trades below Tuesday’s high of 9774.
I anticipate that bearish traders will view a rally to the 9500 - 9600 range as an opportunity to short the DAX 30, with stops above Tuesday’s high of 9774. At 9500 (the lower limit of the range mentioned) the DAX will have corrected 50% of its decline from Tuesday’s high of 9774. Support (and profit target) is at 9251, which is yesterday’s low, but also the low of 2015 (the exact level being 9305). If we break the 2015 low, it is likely that the DAX may slide to 9144.
For the short-term bearish trend to end, traders would need to breach Tuesday’s high of 9774.
ECB to Stick to Plan
The ECB meeting is today’s main event. Traders are anticipating dovish comments and if the ECB does indeed go ahead and deliver a message of more QE or rate cuts in 2016 then we may see a DAX rally. However, with changes implemented in December, I think it more likely that they will stick to their current plan and I suspect that this in turn will lead to a lower DAX.
In the afternoon, U.S. Jobless Claims and Philadelphia Fed Index are on tap. Better than expected outcomes may limit a DAX slide but it will probably not be enough to end the bearish trend.
DAX 30 | FXCM: GER30
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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