The DAX powered ahead yesterday as investors continue to bet on further stimulus for the Eurozone. Yesterday I highlighted buying opportunities in the DAX after recent weakness. A disappointing German Ifo business climate reading fanned the stimulus talk further, as Mario Draghi hinted further stimulus may be required to lift demand. Additionally, this weighed on the single currency and played into the hands of equities in the region.
The DAX cleared the 38.2% retracement of that big slump from its recent record highs to lows just below 9000. The next level to look out for will be the 61.8% retracement of that move, which comes in at 9610. Bad data is likely to be taken as a positive for equities in the interim and investors could look at riding the momentum.
The pair has remained under pressure, with talk of the RBNZ intervening to lower the currency. We’ve also had trade balance numbers out of New Zealand which showed a much worse trade deficit than expected. It’s clear the country needs a weaker currency to achieve balanced growth and rate hikes have paused for a while. The next key level for the pair is in the 0.8300 region, ahead of 0.8250.
Confidence is continuing to grow in the greenback with analysts feeling the Fed has switched to a moderately hawkish bias. This has put significant pressure on gold, with the precious metal logging six losses out of seven sessions. I feel any short-term bounces in gold are likely to be used as an opportunity to sell. Near-term support is closer to 1260 and the RSI suggests there is room for further selling.
With gold coming under pressure, miners have been unravelling of late. RSG also reported FY earnings today and, while revenue picked up, the sceptics will be circling and are likely to look at selling any strength. A break below recent lows of 58 cents is likely to see the selling accelerate in the near future.