Piece written by Alexa Smith, Trive Financial Market Analyst
The spotlight was on Francois Villeroy de Galhau this morning, the Governor of the Bank of France, whose remarks reverberated through European markets. Villeroy emphasised the symmetry of risks associated with both excessive and insufficient action concerning interest rates. Nevertheless, he left room for further measures if circumstances demanded.
Shortly after, the GER 40 Futures (EUREX: FDAX) slipped into a descent, with the German IFO Business Climate report failing to reignite sentiment in reporting its fourth consecutive decline as European economic fundamentals continue to deteriorate. With German and EU inflation data expected this week, the European Central Bank will look for signs of disinflation, particularly following last week’s insinuation that the committee may have already reached peak interest rates.
Technical
The GER 40 Futures traded rangebound between the 15601 support and the 16070 resistance, but a hawkish European Central Bank encouraged a breakdown of the lower boundary of the range and tipped the index futures into a downtrend. Since selling volume is overshadowing buying volume, the index futures may attempt to retest the 14721 major support, with a crossover of the 50-day moving average and the 100-day moving average supporting the occurrence of a downtrend.
However, a move into oversold territory could promote a pullback as the index futures set their sights on the 15061 level. If the price action is bolstered back within the range, the 16133 resistance at the Golden Ratio could mark a pivot point for an uptrend.
Summary
The GER 40 Futures broke down the lower boundary of the range and edged lower, establishing support at the 15338 level. With the IFO Business Climate exuding little optimism, a leg down towards the 14721 support could be a likely course of action. However, a broad disinflationary trend showcased in forthcoming economic data could promote a pullback towards the 15601 level.
Sources: TradingView