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European market envelope: EUR / USD strengthened by hawkish ECB, DAX 40 follows


EUR / USD, DAX, Euro analysis

German DAX rises above trend line resistance, at least temporarily

The German Dax 40 experienced its second day of gains despite increased concerns about the consequences that may arise if Germany (Europe’s largest economy) issues a complete embargo on all Russian energy products (including gas).

While world leaders impose stricter bans and sanctions on Russia, Germany has come under strict scrutiny of Western allies not so dependent on Russian oil and gas.

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Although an immediate withdrawal is likely to cripple the already fragile Russian economy, the decision to do so will exacerbate supply constraints, driving inflation higher. While these concerns are likely to continue for the duration of the war, the performance-weighted DAX has managed to hold on to recent gains with the CAC 40 follow.

Germany 40 (DAX) Technical Analysis

In my article yesterdayI discussed the importance of the 14,000 – 14,400 series which both support and resistance for the index during this month. After bulls failed to push through the 61.8% Fibonacci (Feb – March 2022 move) level of 14,468 in early April, price action retreated into the zone discussed above, before bouncing off the 14,000 handle.

DAX 40 Daily Chart

Graph prepared by Tammy Da Costa using TradingView

As buyers manage to get back above 14,400, they will have to retain favors above 14,600 that were temporarily tested earlier today. If DAX is able to clear this level, the 14,770 handle could offer additional resistance which then leaves the door open for the March high at 14,951.

EUR / USD bounces off support but bulls have a long way to go

With investors praising Europe’s uncertain geopolitical background and a 50 basis point rate hike to be announced at the next FOMC meeting (4ste May), EUR / USD continued to fall against the dollar until a large zone of support at the key psychological level of 1,0800 still holding bears in check.

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With recent hawkish comments suggesting, however, that the ECB (European Central Bank) may start raising rates as early as July, the Euro won, dampening the downward movement.

For the clumsy trajectory to triumph, bears will have to push below the 1,0800 handle with the next level of support residing at 1,063 (the March 2020 low). A break below this level then paves the way for a retest of the 2016 low at 1,038.

EUR / USD Daily Chart

European market envelope: EUR / USD strengthened by hawkish ECB, DAX 40 follows

Graph prepared by Tammy Da Costa using TradingView

— Written by Tammy Da Costa, Analyst for techlives.in

Contact and follow Tammy on Twitter: @ Tams707

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