Dax Index
The DAX index has turned lower in early trading as investors remain concerned about the stronger euro and the stimulus situation in the United States. The index is trading at €12,690, which is lower than the intraday low of €12,817.
A key concern among investors is that the euro has been on an upward trend. The EURUSD price has jumped by 0.35% and is trading at the highest level since September 18. The euro has also strengthened against other key currencies like sterling and the Australian dollar.
A strong euro is net negative for the DAX index and its constituent companies. That is because most of these companies like Daimler, Volkswagen, and BMW make most of their money abroad. As such, a stronger euro makes their products more expensive than their American and Asian competitors.
The DAX is also reacting to the stimulus talks in the United States. While Nancy Pelosi and the White House are still talking, there are limited chances that they will reach a deal in the near term. This is because of the significant differences they have between them. Furthermore, they have been talking since August without a deal.
Meanwhile, investors are still focused on corporate earnings, especially in the United States. Today, the key companies to watch will be Tesla, CSX, and Verizon. Strong earnings will be a positive thing for the DAX index because of the close relationship between the UK and the US.
Most companies in the DAX are in the red. The only firms that are gaining are Linde, Deutsche Bank, Fresenius, Covestro, and BMW, which have risen by more than 0.10%. On the other hand, the top laggards are Delivery Hero, Merck, and Deutche Boerse.
The daily chart shows that the DAX index is in its third straight day in the red. It is trading at €12,690, which is below the important resistance level of €13,293. It is slightly above the support level of €12,220 and slightly below the 15-day and 25-day exponential moving averages. The volatility, as measured by the Average True Range (ATR) indicator has fallen to a multi-month low.
Therefore, for today, I suspect that the index will remain under pressure as bears aim for October’s low of €12,520. On the flip side, a move above €12,800, will invalidate this trend.
