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DE 30 Technical Analysis - DE 30 Trading: 2017-07-07
Stronger euro is bearish for German stock index
Stronger euro is bearish for German exporters. Will DE 30 continue falling?
German economy accelerated in the first quarter of 2017 as the Q1 GDP grew 0.6% over quarter after 0.4% growth in fourth quarter of 2016. Recent data also point to improving German economic performance: unemployment remained at relatively low 5.7% in June after 0.1 percentage point decline in May, and headline inflation rose to 1.6% in June compared with 1.5% a year ago. Nevertheless investors were surprised when the European Central Bank President Mario Draghi said the ECB could adjust its policy tools of sub-zero interest rates and massive bond purchases as economic prospects improve in Europe. The news that ECB is considering a shift to monetary tightening resulted boosted euro’s bullish prospects. A stronger euro in turn negatively impacts earnings prospects of euro-zone exporters as stronger euro makes their products less competitive in overseas markets. This is bearish for German stock index DE 30.
On the daily timeframe DE 30: D1 has been falling after hitting record high in the end of June. The price has fallen below the 50-day moving average MA(50).
- The Donchian channel indicates no trend yet: it is flat.
- The Parabolic indicator has formed a sell signal.
- The MACD indicator is bearish: it is below the signal line and the gap is widening.
- The stochastic oscillator is rising after bouncing off the oversold zone.
We believe the bearish momentum will continue after the price closes below the lower boundary of Donchian channel at 12308.07, confirmed also by the last fractal low. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed below the last fractal low at 12839.25. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (12839.25) without reaching the order (12308.07), we recommend cancelling the position: the market has undergone internal changes which were not taken into account.
Technical Analysis Summary
| Position | Sell |
| Sell stop | Below 12308.07 |
| Stop loss | Above 12839.25 |
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