Morning traders and welcome to the German DAX30 Technical Analysis. Expect more uncertainty this week. There is clear uncertainty over the vote on Tuesday on the Brexit agreement in the British Parliament and this will weigh on the markets. The outcome is still not visible but I think the result will be a ‘no’. How we proceed and go on from that is unclear. So we brace ourselves.
Assuming that the risk of a global recession remains low, then this recent bear market could be over faster than some would imagine providing there is some clear guidance on how to move forward through these issues. It has recently seemed as though we have a bottoming on the stock exchanges. The US Federal Reserve seem more flexible with their monetary policy than expected, so now it’s only the politics to play along.
The positive scenario that is likely to happen in 2019 is above all linked to the meanwhile changed expectations regarding interest rates in the US. The chief central banker Jerome Powell has just stated that the economy will continue to grow, that his house will keep a close eye on the economy when it comes to making interest rate decisions, and that monetary policy is “not fixed”. Notable statements. Who would have given the US Federal Reserve so much flexibility? So far, the fear was enormous that the central bankers make a huge mistake and in a weakening economy in the monetary tightening too tight.
That in terms of interest rate increases but now in fact nothing is set in stone, also show the so-called Fed Funds Futures, ie derivatives on US key interest rates. These sink and sink. Specifically: The market now assumes that this year to even get any US rate hike more! This is an extreme U-turn. The stock markets around the world reacted positively to this. The prices increased across the board. Overall, everything looks better now.
Brexit – or rather the vote in the British Parliament on 15 January – is of course still an obstacle that could slow down the soft recovery again. Likewise, the negotiations between the US and China for free trade. However, US President Donald Trump should also realize that he will have to demonstrate something concrete in order to have a realistic chance of re-election next year. And the Democrats in the US Parliament will not only be able to face confrontation in the year before the election, but will also have to work solution-oriented in order to be perceived as an alternative to the highest political office.
14-01-2019 German DAX30 Technical Analysis Chart
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