GER30 Struggles to Extend its Recent Rally into the 7th Week
GER30 Analysis
The German Index comes from a six-week relief rally and runs its second straight profitable month, but consolidates during the current week, as markets digest economic data, ECB-talk, Covid jitters, geopolitical tensions and corporate earnings.
Renewed fears around the war in Ukraine eased, as NATO Secretary General said that that the explosion in Poland was "likely caused by a Ukrainian air defense missile", not by Russian action. [1]
Eurozone CPI Inflation rose by 10.6% y/y in October as today's data showed, slightly less than the preliminary figure, but still a big beat over last month's sub-10% print. Surging inflation has forced the European Central Bank to the most aggressive rate hike cycle in its history, having raised them to 1.5%.
The bank expects further tightening, but has been vague around the terminal rate. Earlier this week, Mr Villeroy talked about hikes past 2%, which he called the "normalization rate", according to Reuters [2]. There are concerns however as to the impact on the economy, but Eurozone avoided a contraction in the third quarter.
China's retails sales and industrial production – one of Germany's key trading partners – disappointed markets on Tuesday, while Covid-19 cases there are on the rise.
Meanwhile industrial giant Siemens AG expects its Earnings/Share to more than double in Fiscal 2023 and Revenue to grow by 6-9% [3]. This helps broader sentiment, while SIE.de jumps around 7% on the news.
GER30 clinched fresh four-month highs this week and has 14,711 in its eyesight, but a correction may be required for further advance. Despite the recent surge, it may be early to talk about an extension towards and beyond 14,960-15,000.
The index loses steam during the current week and the lack of progress makes its vulnerable to a pull back below 14,000. However, a catalyst will likely be required for a bigger decline that would test the 200Days EMA (at around 14,600).
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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