GER40, Daily
Despite the strong rebound in German factory orders, with a 3.2% gain in December, investors remain concerned about escalating Sino-US geopolitical tensions and the outlook for the global economy.
Strong US jobs data increased speculation that the Federal Reserve may keep raising interest rates further to control inflation. United States Federal Reserve Chair Jerome Powell said on Tuesday that the central bank could be forced to tighten monetary policy if the labor market remains strong and reports high inflation. Nevertheless, the Fed expects “significant progress” on the inflation issue this year. Powell reiterated that the Fed will continue to “react to the data” and that there is a “significant road ahead” to restore price stability.
Combined with the European Central Bank’s recent hike in interest rates, this has raised fears that growth in the US and Europe could stall this year. The hawkish talk from policy makers has added to investor concerns, leading to uncertainty over share prices in Europe.
Earlier this week the GER40 opened lower and traded in a narrow range, as investors grew increasingly concerned about the global interest rate hike potentially taking longer than anticipated. This weighed on technology and real estate stocks, which are interest rate sensitive. GER40 is still trading below last week’s high, despite the positive data on industrial orders in the country beating forecasts in December.
Technical Analysis
GER40,D1 – Technically, the index is still on an upward trajectory with the price currently moving above its 26-day exponential moving average, the RSI at 67 and AO in the buy zone. In the short term, a move above last week’s high of 15,541.95 would confirm a continued rally from 11,859.45 to forecast FE61.8 (drawback from 13,777.95–15,271.95 and 14,902.95 at 15,831.23) and FE100 near the ATH 16,301.00 recorded in November 2021. Meanwhile on the downside, a move below 15,270.45 minor support could test 14,902.95 support and further down. Nevertheless, the index appears to still be strong as Europe’s largest economy’s blue-chip industry is growing rapidly and overall, the uptrend from the GER40 looks unlikely to end.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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