DAX Tests Crucial Support | Investing.com

The geopolitical momentum of the escalation/truce scenario round Ukraine strikingly has its weekly cycles. Harsh rhetoric appears to peak on the finish of the week, adopted by the weekend’s reduction when the perimeters search for methods to barter, giving a breath of air to international markets early within the week.

This week, the identical sample applies with demand for EM currencies and European indices returning to their beginning positions earlier than Friday’s collapse. The introduced talks between the Russian and US international ministers and the possibilities of a summit between Biden and Putin convey again hopes of a peaceable decision. Nevertheless, it’s price realizing that the scenario stays fragile, and up to now, with every new cycle of this momentum, the current scenario has turn into extra dramatic.

And that is seen within the dynamics of the European indices, the place the shaped a double high in January and in February started to churn in step with the geopolitical background, sustaining a downward bias and approaching a important assist degree that has been in place since final Might.

The stress on the DAX to consolidate below the 15,000 mark is going on on two fronts without delay. Firstly, geopolitical tensions are lowering the traction in dangerous property of the European area. As well as, fears of power provide disruptions within the EU attributable to Russia type the background, with excessive and costs holding again the financial restoration.

Secondly, the financial coverage outlook continues to be reassessed. ECB officers are speaking increasingly confidently a few price hike this yr and leaving the door open for such a transfer as early as September.

If the bears handle to push the DAX under the nine-month assist, we’d see an acceleration of the corrective pullback that would take the index right down to 14000 throughout the subsequent couple of weeks. If the politicians’ rhetoric doesn’t appear to be easing, the subsequent goal for a retracement may be the 13000-area, a 61.8% Fibonacci retracement of the extremes of March 2020 and November 2021.