DAX At Highs
European equities are holding near highs ahead of the keenly awaited ECB meeting this Thursday. Stocks have rallied recently on increased expectations that the bank will cut again. Despite having previously signalled a desire to hold rates steady after the latest cut, a downturn in eurozone data has seen a shift in sentient among ECB policymakers. The bank is now widely pegged to cut rates by a further .25% this week which should keep euro stocks supported near-term.
Forward Guidance Key
However, given that the move is now well priced-in, traders will be looking to the bank’s forward guidance for colour on how rates are likely to move beyond this month. If the ECB sticks to dovish signalling and warns that further easing will likely be necessary, this should send socks higher. However, if the bank retreats to its prior messaging and signals that it will likely be appropriate to hold rates steady after this cut, stocks might well reverse as EUR reacts higher with disappointment from bears.
Market Impact
The recent downturn in eurozone data has prompted a stark shift in the market’s forecasting, with headline rates now expected to be slashed to 2% by next summer. As such, traders will be looking for the ECB to confirm this dovish outlook today which should keep EUR pressured and stocks supported. The risk is that if the ECB attempts to downplay economic weakness, EUR rallies and euro stocks get hit.
Technical Views
DAX
Following a brief correction lower, the index has resumed its rally with the market now once again testing record highs. While supported by 18,919.06 and within the bull channel, focus is on a fresh break higher. Beware bearish divergence in momentum studies however. Any break sub 18,919.09 could see a sharp move lower to test 18,186.48 on a stop run.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.