The Ger40 Futures (EUREX: FDAX) have resumed their downtrend after briefly halting a three-week losing streak last week.
The renewed decline follows hawkish comments from European Central Bank officials, with policymakers like Joachim Nagel and Robert Holzmann cautioning against premature discussions of rate cuts due to persistently high inflation.
Germany, the largest economy in Europe, witnessed an uptick in inflation to 3.7% in December from 3.2% the month prior, adding potential weight to the prospect of prolonged higher interest rates. As the market digests these developments, traders eagerly anticipate ECB President Lagarde’s upcoming speech on Friday, seeking insights directly from the source to gauge the potential direction of monetary policy.
The Ger40 Futures achieved a notable feat, surging to a fresh pinnacle and establishing a significant resistance level at 17123. This milestone reshaped the market dynamics, with the previous peak at 16615 undergoing a transformative shift into a now crucial support level following a breakthrough.
Remarkably, the 16615 support level has not only held but also garnered significance, as evident from its retest and subsequent rejection amid oversold RSI conditions. The rejection underscores its role as a substantial support level in the current price action.
Despite the surge from the 16615 level, the market encountered resistance at the 61.80% Fibonacci Retracement Golden Ratio, marking a critical turning point. The market, respecting the Golden Ratio as an intermediate resistance level, initiated a reversal back toward the established support level.
Considering the prevailing oversold RSI conditions at the support level, a potential reversal could be on the horizon. In the event of a reversal, the 50% level potentially emerges as the next point of interest to the upside. Conversely, a breakdown below the support level with high volume could signal bearish pressures. In such a scenario, the 16406 level, forming a demand zone, could become a plausible downside point of interest.
German equities face renewed downside pressures amid hawkish ECB comments. The uptick in inflation to 3.7% in December and a critical resistance at 17123 pose challenges to the upside. The 16615 level, now a vital support, faces an oversold RSI, signalling a potential reversal, while a breakdown may test the demand zone at 16406.
Sources: Federal Statistical Office, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.