Market Overview: Key Developments and Outlook
Asian Session Highlights
- USD vs. Yen: The U.S. dollar remained near a six-week low against the yen.
- Euro Weakness: The euro declined, partly due to political instability in France, where Prime Minister Michel Barnier faces a potential vote of no confidence, which could introduce volatility in the euro and European equities.
- Chinese Yuan: The yuan hit a 13-month low, driven by concerns about potential U.S. tariffs.
- Commodities:
- Gold fell 1.1% to $2,625.69/oz, influenced by a stronger USD and profit-taking.
- Oil prices remained steady.
U.S. Political Developments
- US Steel Protectionism: President-elect Trump opposed the acquisition of US Steel (X) by Japan’s Nippon Steel, pledging tax incentives and tariffs to bolster U.S. steel companies.
- Warren Stephens Nomination: Trump nominated Warren Stephens as the U.S. envoy to Britain, signaling continued focus on strengthening U.S.-UK relations.
Swiss Inflation
- Headline Inflation: November figures came in as expected at 0.7% YoY (headline) and 0.9% YoY (core). The Swiss National Bank (SNB) is expected to cut rates by 25 bps at its next meeting on 12 December.
Key Agenda Items (GMT)
- 15:00: USD JOLTS Job Openings (October) – A key indicator of U.S. labor market health.
- 21:30: USD API Weekly Crude Oil Stock – Insight into U.S. oil inventory levels.
- Earnings Releases:
- Salesforce (Aftermarket)
- Okta (Aftermarket)
Outlook for Europe
- ECB Insights: Five ECB officials, including President Lagarde, will speak on 5 December ahead of next week’s ECB meeting. A 25 bps rate cut is fully expected on 12 December, with further cuts totaling 164 bps by the end of 2025 anticipated.
- Policy Rationale: The ECB’s rate cuts aim to support European growth in response to potential U.S. tariffs and reduced U.S. involvement in Ukraine.
DAX Overview
DAX leaders:
- Deutsche Bank: +1.92%
- Heidelberg Materials: +1.61%
- BMW AG: +1.44%
- BASF: +1.33%
DAX Laggards:
- Sartorius AG VZO: -2.42%
- Symrise AG: -1.55%
- Siemens Energy AG: -1.28%
- Mercedes Benz Group: -1.27%
Germany 40 (DAX) Technical Analysis 4-hour chart:
The DAX has shown strength, led by industrial and financial sectors, reflecting optimism ahead of ECB rate cuts. However, political instability in France and potential U.S. tariffs could introduce near-term volatility. Investors should monitor Eurozone inflation updates and ECB speeches for further direction.
1. Current Price Action and Trend:
- The DAX is trading at 19,942.9, showing a slight pullback after testing the psychological resistance at 20,000.
- The recent breakout above 19,680.5 indicates strong bullish momentum, but overbought conditions suggest a potential short-term pause or retracement.
2. Support and Resistance Levels:
- Resistance:
- Immediate resistance is at 20,039, which aligns with the psychological 20,000 level.
- A breakout above 20,039 would signal further upside, potentially targeting 20,200.
- Support:
- The first support lies at 19,680.5, the previous breakout level. This will act as a critical pivot for bullish continuation.
- Further support levels are at 19,613.9 (aligned with recent consolidation) and 19,495.8 (near the EMA 50).
- Lower support is at 19,382.1 (EMA 100) and 19,289.3 (EMA 200).
3. Moving Averages:
- The DAX is trading above all key moving averages, confirming the bullish trend:
- EMA 20 at 19,702.0 provides immediate dynamic support.
- The EMA 50 at 19,495.8, EMA 100 at 19,382.1, and EMA 200 at 19,289.3 reinforce medium- to long-term bullish sentiment.
4. RSI and Stochastic RSI:
- The RSI is at 74.23, indicating overbought conditions. This suggests the possibility of a pullback or consolidation in the near term.
- The Stochastic RSI is at 95.03, confirming extreme overbought conditions, which may lead to short-term profit-taking.
5. Key Observations:
- The DAX has extended its bullish run with a breakout above 20,000, but momentum indicators are signaling caution.
Thesis:
Scenario 1: Bullish Continuation:
- If the DAX breaks above 20,039, it could target 20,200 and potentially higher levels in a sustained bullish scenario.
- A strong push above 20,039 would confirm the continuation of the uptrend, supported by rising moving averages.
Scenario 2: Short-term Pullback:
- Overbought conditions suggest a potential pullback toward 19,680.5 or 19,613.9.
- A breakdown below 19,680.5 could lead to a deeper correction, targeting 19,495.8 and 19,382.1.
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