The DAX fell on Thursday with the ECB statement and press conference adding a bit of fear into the index.
War headlines and rates continue to be a problem.
The DAX fell on Thursday as we are testing a large round psychologically significant figure in the form of 23,000 euros. It endured a significant risk-off liquidation during the session on Thursday to hit 10-month lows or at least test them in what was a noisy session low.
The primary driver is the ECB. President Lagarde had rhetoric that was more or less read as a hawkish hold as she was focused on the upside inflation risk driven by the ongoing conflict in the Middle East. Geopolitical tension has sent Brent crude toward $117 a barrel during the session, and European gas prices up another 25% stoking fears of stagflation for Germany's industrial core.
Industrials have taken a particularly difficult path and are taking it on the chin during the session, so it makes sense that DAX will continue to be a bit heavy. This is an index that you must watch, because it can have an outsized effect on the EU markets in general.
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Yield Pressures and Technical Levels
The 10-year Bund yield has surged towards 3%, creating a double drag of rising discount rates and squeezed corporate margins. The DAX will find itself looking to recover from here, but the market needs to get above the 23,500-euro level to even begin to have that conversation.
If we were to start falling from here, the 21,500-euro level could be targeted as it was an area of importance previously. For what it's worth, we are getting close to seeing the so-called death cross when the 50-day EMA drops below the 200-day EMA, although that isn't going to happen in the next 24 hours. If it eventually happens though, this is a market that will be very bearish.
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