The German index finds itself collecting some of the earlier gains as this weekend will be crucial for risk appetite.
DAX
The German DAX initially rallied on Friday but as we have seen from the previous 24 hours, it is a bit tough to hang on to gains above the 200-day EMA. That does make a certain amount of sense considering that interest rates in America and the 10-year yield are now above 4.32 and Germany is chasing that.
So with risk appetite being a little bit muted heading into the weekend as we are getting ready to see a peace meeting between the United States and Iran, it does make a certain amount of sense that traders would want to go home flat for the weekend after seeing such a big move over the last 2 weeks.
Keep in mind that Germany is particularly sensitive to what's going on at the moment as they will have to worry about whether or not the flow of energy can head into Germany through the straits of Hormuz.
Energy Vulnerabilities and Geopolitical Outcomes
The strait of Hormuz has been an area of massive contention and if the Europeans are going to be struggling for energy that obviously will play havoc with the German industrial base. Quite frankly that's the biggest vulnerability here.
If we get through the weekend and there is an agreement that is seemingly accepted by all involved, then it is a very high likelihood that we will see the markets price in good news. In that environment I anticipate you have to assume that the DAX rises right along with everything else.
The 50 day EMA currently sits just below and is offering a bit of support, but at this moment I think you have to be very cautious about getting too bullish and I think you also have to look at this through the prism of a market that is very indecisive at a very essentially decisive point.
With this, I like the idea of simply waiting to see how the headlines come out over the weekend and then planning accordingly. All things being equal I prefer to be on the long side buying the DAX but that of course could change very quickly if we get bad news coming out of Pakistan on Saturday or Sunday.