Continued Coronavirus Uncertainty Drags Dax Lower

Fiona Cincotta February 25, 2020 11:05 AM

Dax to test 200 moving average?

Despite advancing on the open, the Dax was unable to maintain any positivity and dropped back into negative territory. Whilst today’s losses are minimal compared to yesterday’s 4% bloodbath, at 0.8% they are still significant.

Coronavirus fears still dominate with the number of cases in Italy increasing fast. At least 283 cases in Italy are confirmed and 5 deaths. Another 5 countries in Europe confirmed an increase in cases. Whilst the WHO aren’t declaring a pandemic, the broad sensation in the market is that we are on the cusp of one.

No end in sight
Whilst markets in Asia have been trending lower over recent weeks, US and Dax were trading at record highs just last week. Between yesterday and today traders are starting to price in a direct hit to the eurozone economy. Traders are no longer viewing this as solely an Asia issue and are attempting to gauge the impact that the virus outbreak could have economies is Europe. 

The problem is that it is very difficult to gauge the potential economic impact of coronavirus right now, given that it is impossible to tell whether this will be a prolonged outbreak pandemic or whether authorities will manage to contain it. The one thing markets hate is uncertainty, the inability to draw a line under an event or issue. So far, traders can’t draw that line so the uncertainty could continue to chip away at sentiment pulling stocks lower.

Levels to watch
The Dax is extending yesterday’s 4% selloff with additional losses of 0.8%. The Dax has fallen through its 50 & 100 sma on the daily chart with bears firmly in control.
It is currently testing support at 12878, the day’s low. A break through here will open the door to 12868 (low 31st Oct) prior to 200 sma at 12832. 
On the flipside resistance can be seen at 13132 (daily high) prior to 13400 (50 sma).

TAGS:

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.