DAX futures tumbled
DAX futures tumbled on Thursday breaking below the crossroad of the upside support line taken from the lows of the 7th of April and that from the 27th of January.
The break below that line carried larger bearish implications and now the index seems willing to challenge the key hurdle of 10120 (S1).
Last week’s break above that key zone confirmed the continuation of the near-term uptrend and as a result, I would prefer to treat any declines that stay limited above that zone as corrective moves. I would need to see a clear break below that key area in order to trust further declines.
Our short-term indicators support further declines as the RSI fell below its 50 line and is pointing down, while the MACD, already below its trigger line shows signs that it could fall below zero. Both indicators show accelerating downside speed. Switching to the daily chart, I see that the break above 10120 (S1) has shifted the medium-term picture positive as well and increased the possibility for the index to continue higher in the foreseeable future.
Support: 10120 (S1), 9950 (S2), 9800 (S3)
Resistance: 10400 (R1), 10530 (R2), 10700 (R3)
In Germany, all the regional CPI rates for April fell from the previous month, suggesting that the preliminary national inflation figure, due out later, is likely to be lower as well. Germany’s CPI rate is expected to decline to 0.0% yoy from +0.1% yoy previously, but given the significantly larger falls in the regional rates, we see a high likelihood for the national figure to disappoint as well.
In such an event, Eurozone’s flash CPI rate for the same month due out tomorrow, may also fall short of estimates and perhaps enter the negative territory.
Eurozone’s preliminary CPI rate is currently expected to fall to -0.1% yoy, from 0.0% yoy. We wouldn’t expect it to have a major impact though, as ECB President Draghi signaled recently that inflation will run very low or negative in coming months.
The dollar traded lower against all of its G10 counterparts during the European morning Thursday. The biggest winners were JPY, NZD and AUD in that order.