Marshall Gittler
Trading Analysis
DAX futures
The dollar traded higher against almost all of its G10 peers during the European morning Monday. It was unchanged only against GBP.
The German Ifo Business climate index rose for the fourth consecutive month in February, driven probably by the low oil prices. The expectations index also rose, in line with the strong ZEW survey released last week. The figures fell short of expectations and the increases were only moderate, however, probably because of the Greek and Ukrainian problems. Nonetheless, the overall improvement in the Ifo indices suggest that German business investment could pick up in Q1 and lift optimism about an economic recovery. As the Greek risk resolves, temporarily, and if the ceasefire agreement is respected by the pro-Russian rebels and Ukraine, we could see a stronger German growth rate that could support EUR somewhat, in our view.
Regardless of the moderate improvement in the Ifo, EUR weakened as the market reconsidered the implications of the Greek settlement, which leaves a number of points unresolved.
DAX futures initially firmed up on Friday after the Greek deal on its bailout program. The index breached the psychological resistance (now turned into support) zone of 11000 (S1), to print a new record high at around 11165 (R1). However, DAX retreated from its new high after the German Ifo survey fell short of expectations. After the exit of a symmetrical triangle on the 13th of January, the price structure has been higher highs and higher lows above both the 50- and the 200-period moving averages. Therefore, I would consider the overall picture to be positive. Nevertheless, I would be careful that the corrective move may continue for a while. Perhaps to test the 11000 (S1) key barrier as a support this time, or ever lower. My concerns stem from the RSI, which hit resistance near its 70 line and turned down. Moreover, on the daily chart I see negative divergence between both the daily oscillators and the price action, magnifying the case for the continuation of the pull back.
Support: 11000 (S1), 10800 (S2), 10600 (S3)
Resistance: 11165 (R1) (all-time high)
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