GER30 Under Pressure but the Golden Cross Hints at More Strength
GER30 Analysis
The German index comes from an impressive two-month rally, but has been losing steam recently and trades in the red in December. It may have narrowly avoid losses last week, but looks like it will have a hard time achieving a profitable close during the current one.
Eurozone steered clear of a contraction in the third quarter, since GDP grew by 0.3% q/, which is definitely not robust, but was higher than expected. Furthermore, China has been softening its pandemic containment measures, relaxing the strict zero-Covid strategy.
On the other hand, infections in the world's second largest economy remain high, while imports and exports in USD terms, posted their biggest contraction since early 2020 in November. Market expectations around the Fed's tightening path meanwhile have firmed up, after a series of strong economic data from the US.
As a result, broader sentiment has been poor this week and GER30 is on the back foot, vulnerable to the critical 13,980-45 region, which comprises of the 23.8% Fibonacci of the October low/December high rebound and the EMA200. Daily closes below this area would pause upside bias and could accelerate a fall towards the 38.2% Fibonacci (13,534) although a catalyst would likely be required for that.
Despite this week's difficulties, prospects of a downshift in the size of rate hikes by the European Central Bank (ECB) can support GER30. On the technical front, it remains in control and has the ability to push form fresh monthly highs (14,609), but the 14,960-15,000 handle looks distant at this stage.
Moreover, a look at the Daily chart shows the formation of a Golden Cross (EMA50 crossing above the EMA200), which is generally viewed a precursor to further strength. Although it is still early, this bullish cross had last occurred in July 2020 and had eventually led to the late-2021 record highs.
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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