DAX Boxed In By Draghi
Ashraf Laidi | Jul 21, 2017 02:23PM ET
The before-and-after DAX 30 charts from Monday and today highlight the straightforward nature of technical formations in translating into anticipated outcomes. You may recall we posted this as our Monday mystery chart and issued it as a short for our Premium subscribers to enter at 12550 and exit Friday at 12205. Other index trades remain open into the weekend alongside 2 FX and 2 metals trades.
DAX 30 is set to complete its 2nd monthly decline after an uninterrupted 6-month rally, which was the longest since the June 2012-January 2013 advance, following the Italy/Spain debt resolution of summer 2012. The ECB's inevitable start of effective tapering — not the meaningless tapering seen in March when duration was extended and size curtailed — is boosting the euro and dragging on German and European equities.
The argument that any ECB tapering will be accompanied by reinvested proceeds from assets owned, which would not hurt stocks, does make sense. But it may not weigh on the euro as hard US data hardly makes a case for H2 Fed hike. And with the German–U.S. 10-year spread breaking above its 6-year trend-line resistance, the euro reward tends to be more material than indices damage.
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