Dax Lower Post ECB

ECB kept its main interest rate unchanged at -0.5% and decided not to increase its bond buying programme even as the Eurozone economy shrinks at -3.8% in Q1.

Charts (2)

As expected, the ECB kept its main interest rate unchanged at -0.5%. However, the central also surprised the market by deciding not to increase its bond buying programme even as the Eurozone economy shrinks at the fastest pace on record in Q1. There had been a broad expectation that the ECB would expand its Pandemic Emergency Purchase Programme (PEPP). However, there was a clear willingness to increase if deemed necessary.

 The ECB added a few additional liquidity measures. For example, in order to keep banks’ lending the ECB said it would lend to banks at rates as low as -1% through a planned programme.

The ECB’s decision to pause and take stock after 6 weeks of action follows a similar move by the Fed on Wednesday. There has been so much action from the central banks over recent week, it makes sense to stop and take analyse where we are.

More fiscal stimulus
Lagarde also stepped up the pressure on European governments to do more. The response from EU governments has been too little, too late. Lagarde once again called for more fiscal stimulus hours after data revealed that the Eurozone GDP shrunk -3.8%. This could just be the beginning as Christine Lagarde warned that the Eurozone economy could contract by 12% this year.

Dax levels to watch
After starting the session on the front foot, the German index is trading almost 3% lower. Even so, the bullish chart remains intact as the index continues to trade above its ascending trend line. A breakthrough the trend line at 10710 could see the Dax under more pressure.
Immediate support can be seen at 10797 (low yesterday) prior to 10710 trendline support.
Immediate resistance can be seen at 11342 (today’s high) followed by 11530 (high 6th March)

More from Indices

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.