GER30 Extends its 2 Year Lows Amidst Hawkish CB-Talk & Recession Fears

  • GER30
    (${instrument.percentChange}%)

GER30 Analysis

September has been an intense month in terms of central bank activity, as both the US Federal Reserve and its European counterpart delivered historic rate hikes, pointing to more tightening ahead, in order to fight persistently high inflation.

Along with other factors, such as the energy crisis, these actions have also reignited recession fears, with the Fed essentially giving up on the idea of a soft landing, while the ECB expects the economy to stagnate soon.

Policy makers from the European Central Banks are sticking to their guns this week, as President Lagarde repeated that they expect rates to "raise interest rates further over the next several meetings" [1], while Mr Nagel noted that "Further decisive action is required to bring the inflation rate down to 2% in the medium term" according to Reuters. [2]

These developments are detrimental to stock markets, with GER30 erasing around 7% on the month, as it extends its losses today, to fresh two year lows. This exposes it to the November 2002 low (11,519), although bears may need new impetus for a breach and bigger decline towards and below 11,157.

On the other hand, the Relative Strength Index (RSI) is at oversold levels, which may contain the fall and give GER30 a chance to fight back. A rebound towards 12,372-12,402 cannot be ruled out, but under these conditions it hard to see substantial recovery towards the EMA200 (at around 12,870).

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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.

References

1

Retrieved 28 Sep 2022 https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220926_1~0bd6fcc86c.en.html

2

Retrieved 26 Nov 2022 https://www.reuters.com/markets/europe/ecb-faces-risk-runaway-inflation-expectations-nagel-says-2022-09-26/

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