GER30 Analysis

The German index comes from its best month of the year, thanks to the strong performance in the second half of July. This allowed it to close last week above the 50% Fibonacci of the June High / July Low slump and into the daily Ichimoku cloud.

The current one starts with cautious optimism and GER30 seems to have the technical room for new highs above the 61.8% Fibonacci, although it does not inspire much confidence for more at this stage. The broader 14,040-14,190 region provides strong resistance with the descending trendline from this year’s highs and the 200Days EMA and a strong catalyst will be required for moves beyond it.

On the other hand, sources of worry remain as Moody’s slashed Italy’s outlook to negative on Friday, in the aftermath of Mr Draghi’s resignation, while Chinese exports dropped last month.

Furthermore, the European central bank lifted rates out of negative territory recently and another aggressive 50 basis points hike could be in the table, whereas the lack of clear guidance from the ECB and other major banks may create a difficult environment.

Last week, GER30 showed signs of exhaustion following its recent rebound and today, it struggles once again to leave the daily Ichimoku Cloud behind. This makes it susceptible to renewed pressure back towards 13,330-13,266, an area that has the ability to support it. Daily closes below the EMA200 however, will shift near-term bias on the downside and expose to the 13,000 mark.