DAX Plunges On Coronavirus Fears & Weak IFO Data

Fiona Cincotta
By :  ,  Market Analyst

The DAX has joined global indices tanking  2.2% in early on Monday as the Wuhan coronavirus outbreak weighs on risk sentiment. At the time of writing the deadly virus had killed 80 people and over 2750 are infected. Chinese authorities have 17 cities, with 40 million inhabitants in lock down in an attempt to control the spread of the virus. 

Investors are selling out of riskier assets as concerns grow over the impact that coronavirus will have on Q1 growth and global trade. Add into the mix that markets were sitting around all time high’s and investors are seeing this as a time to book profit.

IFO Data Disappoints
Adding to Germany’s woes was IFO business confidence data,which undershot in January, printing at 95.9 vs expectations of 97. The IFO executives outlook index unexpectedly fell to 92.9, driven by dwindling prospects in the service sector and construction sector, sectors which had supported Europe’s largest economy in recent quarters. Perhaps the only positive from the report was that manufacturing continues on show signs of stabilization; whilst the sector is still shrinking it is doing so at a slower pace. 

All in all, the data has dashed hopes that rising optimism among companies would lead to a broader economic recovery. Instead the data sounds a warning bell for those expecting a solid rebound in German economic growth. 

Levels to watch:
The DAX gapped lower on the open on Monday and the selloff is gathering steam as investors take risk off the table.  The index has dropped through its 50 & 100 sma on 4-hour chart and is fast approaching its 200 sma at 13195 as the bears take control.

Immediate support can be seen at today’s low of 13285, prior to 200 sma at 13195. A breakthrough here could open the doors to support at 13110 (low 8th Jan) before 12950 (low 6th Jan).

On the flip side, immediate resistance sits at 13399, today’s high, before 13604 (Friday’s high) and 13640 (high 22nd Jan).


Chart analysis of DAX. Published in January 2020 by FOREX.com

Related tags: Germany 40

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