GER30, H1 & H4
Today’s German GDP numbers showed strong investment growth in 2017. A still very robust recovery then that is also evident in marked improvements in jobless numbers across the Eurozone, which in turn should help to lift wage growth this year and see the ECB phasing out net asset purchases in Q4 this year. German 2017 growth accelerated to highest rate since 2011. Growth reached 2.2% y/y in real terms, slightly less than Bloomberg consensus, but adjusted for calendar factors growth was a whopping 2.5% y/y as expected, after 1.9% y/y for both readings in 2017. Once again growth was primarily underpinned by domestic demand, with private consumption up 2.0%, and investments rising 3.0%, as machinery investment jumped 3.5%. Net exports contributed 0.2% points to the unadjusted annual rate, gross fixed capital investment 0.6% points and private consumption 1.1% points. So not the typical export led recovery, although after a negative contribution of -0.3% points last year, the external sector is also picking up amid strong global growth. Looking ahead orders suggest ongoing growth momentum and wages are also expected to pick up as the labour market is looking increasingly tight and the ECB’s policy is looking too expansionary for Germany.
European stock markets are narrowly mixed, with the UK100 outperforming again and up a modest 0.09% as the pound continued to retreat. The GER30 meanwhile lost a further -0.11% today as the EUR strengthened, after Asian markets mostly headed south amid concerns of overbought conditions and investors moved back into yields after yesterday’s sell off. The index rallied in the first week of the year, reaching the 13,425.58 level on Monday, however it is under-performing in short-term since then. It is currently traded below the 23.6% of the rally seen last week, after breaking the recent support at December’s high at 13,335. The immediate intra-day support comes at recent swing low, at 13,210.00, while the next one comes at 13,185.00, which is the 50-period EMA, in the 4-hourly chart. The particular level had also been a strong Resistance level for November and December, with the pair retesting it several times.
Meanwhile, the current resistance area comes intra-day between the 20-period MA and the upper fractal , at 13,315 – 13,350.00 area. Therefore, with ECB Monetary Policy Meeting Accounts in front and with European stocks moving sideways, GER30 should be in our watch-list. Any break or closing today below the 13,210.00, would suggests that bulls have lost the control of the asset, and therefore GER30 is likely to move lower, down to 38.2% and 50% Fibonacci levels, at 13,163.00 -13,084.00 area.
However a recovery today, and a closing above December’s resistance at 13,335.00, would confirm that positive momentum still holds and therefore it is likely to see another move higher, close to year’s highs. Meanwhile a break within the day above the 13,315, would seen price action crossing back to the upper Bollinger Bands pattern and therefore retesting the 13,350 level.
Momentum indicators intra-day are turning lower, with RSI down to neutral, Stochastic crossing below the oversold territory, while MACD remains positive but pointing lower. The Daily picture, is mixed, with MACD and RSI at neutral level, and STochastic at the edge of the Overbought area.
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