DAX Index is Crashing This Week – Here’s the Next Level to Watch

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Written By: Crispus Nyaga
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    Summary:
  • The DAX index is crashing this week as investors fear about the rising number of Covid-19 cases. Here is the next support level to watch.

The DAX index is tumbling today as investors continue to worry about the upcoming US election and the overall stronger euro. The market is also focusing on the ongoing earning season from the United States and Europe. The blue-chip German index is down by more than 1.25% and is trading at €12,405, which is substantially lower than this month’s high of €13,175.

The DAX is falling because of uncertainties surrounding the upcoming election in the US. Recent polls show that Joe Biden is leading both nationally and in key battleground states. Going by his manifesto, his presidency will have good and bad outcomes for the stock market, especially if Democrats take back the house and senate.

First, on taxes, he has promised to undo most of the tax cuts implemented by Donald Trump. That will be negative for US and European equities. Second, on regulations, he will accelerate regulations and undo most of Trump’s deregulation agenda. However, on a positive side, he will likely do away with Trump’s trade wars, which he believes were negative for the country.

The DAX index is also falling because of news that Iran and other countries have started meddling on US election.

Meanwhile, investors are worried about the latest surge in Covid-19 cases in Germany. According to health officials, the number of new cases rose by more than 12,000, a record. That brought the total number of infections to more than 397k. The same trend happened in other countries like the UK and Spain, where their cases have risen to more than 1 million.

The DAX index is also falling because of a recent report that showed most of Europe’s small businesses will file for bankruptcy this year. A survey by McKinsey showed that half of small firms will go out of business, the largest increase ever.

Europe potential bankruptcies

Only three companies in the DAX are in the green today. Continental, Merck, and Adidas have all jumped by more than 0.15%. On the other hand, the top laggards in the index are Fresenius, Linde, Allianz, and Bayer.

DAX index technical outlook

The daily chart below shows that the DAX index has been on a sharp decline this week. It has fallen from a high of €13,200 to the current low of €12,435. The price has also moved below the 15-day and 25-day exponential moving averages. It is also inside the equidistance channel shown in blue while the Average True Range (ATR) has continued to fall.

Therefore, I suspect that the index will continue falling as bears aim for the lower support of the channel at €12,220. On the flip side, a move above the psychological resistance of €13,000 will invalidate this trend.

DAX technical chart

Written By: Crispus Nyaga

Crispus Nyaga is an analyst and consultant with more than 8 years of experience. He started trading Forex while completing his BSc degree and he has worked for brokers like OctaFX, easyMarkets, & Capital. He has also contributed widely in leading websites like rkdream.com, SeekingAlpha, iNvezz, DailyForex, and BanklessTimes. In 2017, Crispus completed his MBA.

Published by
Written By: Crispus Nyaga