Soaring to New Highs, Eyeing 15,500

Key Talking Points:

• DAX 30 consolidates strong bullish momentum
• Concerns over blood clots after AZ vaccine is turning sentiment

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Despite the Easter holiday, the DAX 30 hasn’t taken a breather since last Tuesday and has seen new all-time highs every day since the month of April started, now just shy of the 15,500 level. The German index has been on a strong bullish trend since it tore through strong resistance at 14,141 at the beginning of March. Despite increasing worries about the economic effect of a third wave of Covid-19 in Europe, the DAX 30 is in a strong position to consolidate further upside momentum given how it is keeping well above its two main trendlines.

We’re likely to see equities pushing higher this week given how cash inflows related to the beginning of the month and the new quarter are likely to be delayed given the holiday. The US labor data published on Friday also helped the DAX 30 achieve new highs as the Non-farm Payrolls for the month of March were much better than expected (916K vs 647K). That said, and despite the speed of economic recovery seeming to be as exceptional as the crash that preceded it, many economists have warned about over-optimism regarding Friday’s figures, given how financial markets are ahead of themselves given the actual state of the economy and the uncertainty regarding the stabilization of Covid-19.

There is also some concern regarding the news that several medical watchdogs are investigating the relationship between the AstraZeneca vaccine and blood clots in people under 50, given there seems to be some sort of link. We already saw this same issue halting the vaccine program in many countries back in March when it was thought to be harmful to over 55s, so there is potential that it may cause another delay in vaccinations, which would see a dent in sentiment given its effect on economic recovery.

DAX 30 Levels

As mentioned above, the DAX 30 is in a strong position to consolidate further bullish momentum, although we may see short-term correction in an attempt to soften overbought conditions and attract new buyers. Today’s retracement below yesterday’s opening price may be a sign that this retracement may be underway, although I wouldn’t expect it to go much further in today’s session. Therefore 15,200 may be seen as immediate support, at which point the German index is exposed to the short-term ascending trendline from the end of February, with short-term support converging with the 15,000 mark.

Although I don’t see much further correction happening in the short-term, if we see a fall below 15,000 then I’d focus on the longer-term trendline which is offering support around the 14,385 area. There isn’t much to go on for the topside but I’d expect buyers to be targeting the 15,500 area in the short-term, although there could be some resistance between 15,370 and 15,424, where the 127.2% Fibonacci is located.

DAX 30 Daily chart

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin