Germany 40 Index – Charting the Uncharted
The week started badly for the Germany 40 index as it was dragged lower by the sharp dip in market sentiment created by the fears around Chinese artificial intelligence DeepSeek’s potential impact as a disruptor in the AI space.
However, that early Monday drop to lows at 21,078 didn’t last long, with strong earnings updates from SAP (No.1 weighting in index) which saw the stock to print new all-time highs, and Siemens (No.3 weighting in index), helping to reverse the falls and start a rebound that has seen the Germany 40 register yet another record high at 21,791.
Not only that, the ECB cut interest rates for the Eurozone, as expected by 25bps (0.25%) to 2.75% on Thursday, and President Lagarde maintained the central bank’s dovish stance, suggesting risks to growth are tilted to the downside and that inflation will fluctuate before settling around the central banks 2% target, while indicating policymakers remained open to more interest rate cuts, if incoming data between now and the next meeting on March 6th supported it.
So, looking forward, it seems that the macroeconomic backdrop may be more settled for the Germany 40 index, although excessive long positioning could be a catalyst for a correction at some stage.
What do the technicals say?
Technical Update: Germany 40 Index
The current phase of price strength continues to be seen within the Germany 40 index, a move that has consistently posted new all-times. Of course, this means the index is now trading in uncharted territory, where it can often be difficult to establish the next valid resistance levels.
That said, technical analysis can help in this regard. By using Fibonacci extensions of recent price weakness, we can project potential resistance points, on which traders may be focusing. This doesn’t guarantee sellers being found at these levels, but it is worthwhile to be aware of these possible resistance levels over coming trading sessions.
Resistance: Fibonacci Extensions
Calculating extension levels using the last price correction seen between the December 13th high at and the December 20th low at, indicates that traders may now watch how resistance at 21780, the 138% extension level is defended, as this may be an area at which fresh sellers emerge again.
However, while much depends on future price trends, a break higher above this level on a closing basis may result in further price strength towards 22005, which is the 162% extension level, or even 22350, which is the higher 200% extension.
Support: What is the Germany 40 was to dip from here?
Of course, just because an asset is posting new all-time highs, doesn’t mean that price strength can continue indefinitely without downside corrections. With that in mind, we must be aware of possible support levels that if broken may indicate that a deeper phase of price weakness is about to emerge.
Traders may well be watching the 21432 level, which is half of the latest strength, as a potential support, if a sell-off is seen. Breaks below this level could skew risks towards further price weakness, with focus may be then shifting to the weeks low at 21078.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
However, that early Monday drop to lows at 21,078 didn’t last long, with strong earnings updates from SAP (No.1 weighting in index) which saw the stock to print new all-time highs, and Siemens (No.3 weighting in index), helping to reverse the falls and start a rebound that has seen the Germany 40 register yet another record high at 21,791.
Not only that, the ECB cut interest rates for the Eurozone, as expected by 25bps (0.25%) to 2.75% on Thursday, and President Lagarde maintained the central bank’s dovish stance, suggesting risks to growth are tilted to the downside and that inflation will fluctuate before settling around the central banks 2% target, while indicating policymakers remained open to more interest rate cuts, if incoming data between now and the next meeting on March 6th supported it.
So, looking forward, it seems that the macroeconomic backdrop may be more settled for the Germany 40 index, although excessive long positioning could be a catalyst for a correction at some stage.
What do the technicals say?
Technical Update: Germany 40 Index
The current phase of price strength continues to be seen within the Germany 40 index, a move that has consistently posted new all-times. Of course, this means the index is now trading in uncharted territory, where it can often be difficult to establish the next valid resistance levels.
That said, technical analysis can help in this regard. By using Fibonacci extensions of recent price weakness, we can project potential resistance points, on which traders may be focusing. This doesn’t guarantee sellers being found at these levels, but it is worthwhile to be aware of these possible resistance levels over coming trading sessions.
Resistance: Fibonacci Extensions
Calculating extension levels using the last price correction seen between the December 13th high at and the December 20th low at, indicates that traders may now watch how resistance at 21780, the 138% extension level is defended, as this may be an area at which fresh sellers emerge again.
However, while much depends on future price trends, a break higher above this level on a closing basis may result in further price strength towards 22005, which is the 162% extension level, or even 22350, which is the higher 200% extension.
Support: What is the Germany 40 was to dip from here?
Of course, just because an asset is posting new all-time highs, doesn’t mean that price strength can continue indefinitely without downside corrections. With that in mind, we must be aware of possible support levels that if broken may indicate that a deeper phase of price weakness is about to emerge.
Traders may well be watching the 21432 level, which is half of the latest strength, as a potential support, if a sell-off is seen. Breaks below this level could skew risks towards further price weakness, with focus may be then shifting to the weeks low at 21078.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.