The European Central Bank (ECB) did not pre-empt the U.S Federal Reserve to cut interest rates on Thursday but hinted towards a rate cut and signals that more monetary easing is on the cards.
ECB president Mario Draghi in his press conference paved the way for a new round of asset repurchases as part of a range of stimulus options in a bid to ensure financial and economic conditions remain favourable.
Draghi also hinted towards an interest rate cut as he sees rates at present or lower levels at least through to the first half of 2020. The Euro reacted to the announcement and fell to a 2-year low against the U.S Dollar.
In his statement to reporters, the ECB President stated that the risk of a recession in the Eurozone was low. This amidst a weakening Manufacturing sector which has slumped to a six-year low with Germany, the Eurozone's biggest economy at a seven-year low. The manufacturing sector was hardest hit due to recording a decline with trade tensions, Brexit uncertainties and the woes of the German auto sector taking their toll.
Taking a closer look at the DAX
The German Index has been filling the triangle pattern for some time now, and a breakout might be on the cards very soon. If the 12295-support level does not hold, we might expect the price action to move lower significantly. A close above the 12450-resistance line would give hope that the price might move higher to 12657 once more.
Source - Bloomberg
Taking a closer look at the EURUSD currency pair
The currency pair has seen extreme volatility from yesterday's interest rate announcement, testing the Head & Shoulders neckline before retreating once more. The technical support line at 1.1124 has been tested numerous times over the last couple of months signaling the importance of the level and that a move lower might be imminent.
Source - Bloomberg
Strategy: One should always consider the inverse correlation between the DAX and the EUR/USD currency pair when trading either of these instruments. One might expect to Long (Buy) the DAX when the EURUSD currency pair is under pressure and vice versa.
Source - KOYFIN
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Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Barry Dumas, Market Analyst at GT247 (Pty) Ltd t/a GT247.com (“GT247.com”) as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. GT247.com does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information which we receive from third party data providers. You must rely solely upon your own judgment in all aspects of your trading decisions and all trades are made at your own risk. GT247.com and any of its employees will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.
