The German index comes from a strong week, during which we saw a rebound in sentiment and a relief rally in major stock markets, now heading towards the conclusion of a profitable month.
Today it stays on the front foot and eyes the key area of 16,740-16,821, which is defined by the 200Days EMA and the 61.8% Fibonacci of the 2022 High/Low drop. GER30 has already made significant progress from those lows and daily closes above the aforementioned levels, could allow it to extend the recovery towards 76.4% (15,387), although it may not be yet ready for such a push.
The German index had reacted well to Ms Lagarde's recent hawkish commentary, for interest rate lift-off in July , but monetary tightening by the European Central Bank (ECB) could potentially create difficulties.
Furthermore, there are still various risk factors that could weigh on sentiment and contain its upward momentum, while the Relative Strength Index (RSI) is at overbought levels. Such conditions have led to sharp pullbacks recently and month-end flows could potentially work against it, given its more than 4% rise this month, at the time of writing.
As such, we could see pressure back into the daily Ichimoku cloud, but a break below the lower border and the EMA200 (14.080-20) would be needed to stop the momentum and open the door for a bigger retreat that could threaten the ascending trendline from this year's lows.
Today's economic calendar includes CPI inflation from Germany, while Eurozone's sentiment/confidence indicators are due shortly. Furthermore, EU leaders meet today and tomorrow to discuss, among other things, an embargo on Russian oil.
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.
Retrieved 25 Jun 2022 https://www.ecb.europa.eu/press/blog/date/2022/html/ecb.blog220523~1f44a9e916.en.html