DAX 30 Heading Greater Regardless of German Lockdown, EUR/USD Unfazed by ECB

Key Speaking Factors:

• Brexit and US stimulus talks stay on the heart of market sentiment
• Germany will enter a tough lockdown on Wednesday, DAX 30 springs again from 13,000
• EUR/USD goals in the direction of 2.5 yr excessive

GERMANY GOING BACK INTO HARD LOCKDOWN

A rising charge of infections and exponential progress in the previous few days is the rationale why Germany can be getting into a full lockdown from Wednesday, with all faculties and retailers closed till the 10th of January. This can have an effect on the Christmas interval, a choice made as authorities had been “compelled to behave” Angela Merkel mentioned, after Friday nearly 30,000 infections and 598 deaths in Germany.

This transfer comes after a softer lockdown imposed at the start of November has bared fruit up till folks began to fulfill mates and family members forward of the Christmas vacation. Beneath new guidelines, personal gatherings of greater than 5 folks can be banned, and new yr’s eve celebrations have been strongly discouraged.

Inventory Market Vacation Calendar 2020/21

STOCKS REGAIN POSITIVE MOMENTUM

In fairness markets, sentiment has develop into extra constructive as there appears to be some progress on two main political fronts. On the one hand, Brexit talks are set to proceed this week after Boris Johnson and Ursula von der Leyen had set yesterday because the deadline to find out the way forward for talks. In the meantime, US stimulus talks appear to be stepping into the suitable path with some analysts anticipating there to be a bipartisan compromise that may result in a deal within the subsequent few days.

There may be additionally elevated talks about whether or not we are going to see a Santa Rally this yr, which tends to see shares rise round 1,5% in the previous few buying and selling days of December, main into the primary two classes of the brand new yr. However there’s a robust argument that shares are massively overbought this yr, pushing alongside from the constructive vaccine information in November, so a Santa Rally may very well be far-fetched.

That mentioned, seasonal developments are usually fairly robust, and constructive momentum on the anticipated enchancment of the well being scenario given a vaccine roll-out would possibly maintain shares heading greater within the new yr.

DAX 30 Each day chart

Wanting on the day by day chart, the DAX 30 confirmed robust help on the 13,000 stage as I discussed final week, after Friday’s bearish rally was met with robust shopping for stress at that stage. That is probably going to proceed going ahead, as we have to see a stronger bearish case to contemplate additional retracement in the direction of the 12,500 space.

Consolidation continues to be not out of the image, as value motion heads again in the direction of the world the place it was buying and selling the final two weeks. To interrupt sideways buying and selling we would wish to see a continued push above 13,400, gearing as much as face the 10-month excessive seen final Wednesday at 13,458. Momentum indicators are displaying combined alerts, with the stochastic resetting across the 35 stage, while the MACD turns into barely extra unfavorable, which may level to this short-term indecision as regards to path within the DAX 30.

EUR/USD HEADS TOWARDS 2.5 YEAR HIGH

Four days after the ECB’s try to melt the euro’s current power, EUR/USD is nearing two-year highs once more on renewed positivism relating to US stimulus and Brexit, which is conserving risk-appetite afloat. The US Greenback is buying and selling decrease in the present day as an try and get well some floor noticed a bullish rejection on the 91.00 mark, which is conserving EUR/USD supported on the 1.21 space.

The ascending trendline from the upper lows because the 4th of November stays as a powerful help space within the short-term, which means that 1.2085 is the rapid help, adopted by final week’s low at 1.2060, from which level a fall under 1.20 turns into an actual risk. On the upside, a day by day shut above 1.2160 may collect sufficient bullish momentum to interrupt the two-and-a-half-year excessive at 1.2177, with the 1.22 line as the following goal.

EUR/USD Each day chart

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— Written by Daniela Sabin Hathorn, Market Analyst

Observe Daniela on Twitter @HathornSabin