The Dax struggled in European trade this morning as stock markets hit the skids. This week’s brief rally fizzled out after soaring UK inflation numbers and declining commodity prices added to palpitations around monetary policy tightening. The Dax slumped along with European stocks, while haven assets including the US dollar, Treasuries and the Yen rose.
Earlier today we had comments from European Central Bank vice president, Luis de Guindos who once again reiterated the ECB’s position. The ECB VP stated that the size of the September rate hike will depend on inflation expectations, while he hopes inflation will start easing after the Summer. As DAX struggled this morning it’s no surprise that all sectors are in the red, led by healthcare and basic materials with losses of 2.65% and 2.36%.
From a technical perspective, we had a bearish candlestick close last week which closed below key support that turned resistance at the 13270 area. Following on two days of bullish price action, we had a shooting star candle close on the daily timeframe, retesting and closing below the 13270 area.
We have seen a push down today which currently looks like a bearish engulfing candle stick pattern is forming. We will need a daily candle close below previous monthly lows at the 12960 area. A break below could open up a retest of year-to-date lows of around 12450.