It’s a case of wait-and-see ahead of the deadline for the Iran ceasefire agreement, with question marks remaining over whether peace talks will resume in Islamabad on Wednesday. According to WSJ, Iran says ceasefire talks can resume only after the US lifts the blockade, while Fars has reported that Tehran says it has yet to decide whether to take part in those talks. Meanwhile, JD Vance was meant to leave for Islamabad this morning for Iran negotiations, but his departure was postponed, according to NYT, and he is headed to the White House. There is a lot of uncertainty, and so oil prices have pushed higher and stock indices lower as traders reduced risk exposure amid the uncertainty. European markets closed lower, as traders took no chances. The near-term DAX forecast remains tied to the direction of oil prices.
No deal should be bad for risk assets
With markets surging amid optimism that the war is soon going to end, and the Hormuz Strait to open, markets are now more cautious. If there’s no deal, I would imagine that oil prices could climb back above $100, which would likely invite pressure on equities. However, if there is a deal — or at least an extension of the ceasefire — that could be mildly positive for markets and keep oil prices contained around $90- $95 per barrel. Interim support is seen at $94.00-$95.00 area now on Brent, with interim resistance at $98.00 being tested at the time of writing.
EU’s reliance on energy means deal needed to trigger fresh buying interest
The German DAX index has stopped rising and didn’t hit a new record high, underperforming its US counterparts which have already reached fresh record territories this week. European markets, particularly Germany, remain more sensitive to oil prices given that the region is a net energy importer. That’s one reason why the DAX hasn’t yet pushed to new all-time highs. But could that change soon?
Technical DAX forecast: key support being tested
Following the breakout above key resistance in the 24,200-24,250 area on Friday, the index has returned to re-test this area from above. From a purely technical point of view, the path of least resistance remains to the upside for now, although that could change in the event of no deal between Iran and the US. In that scenario, we could see a decisive break back below this area of support. But for as long as this level holds, the bias remains higher. From here, I’m expecting the index to move towards the January highs around 25,500 area, which marked a record high.
Otherwise, if talks collapse then all bullish bets are off again.
Watch: Technical video analysis on crude oil, EUR/USD and DAX
