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Bogdanovicc

DAX analysis

Question

Where do you see DAX Index trading in the few weeks? It seems that there’s only one direction judging by the price developments recently... 

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Hi Bogdanovic, thanks for the question.

The DAX Index has been on a roll recently. It has made consecutive gains on a daily basis to push the price into the key resistance on the weekly chart. 

The biggest factor behind this push higher lies in the fact that the European Commission unveiled a €1.85 trillion recovery package to boost the EU economy after the Covid-19 crisis.

"This is Europe's moment. We either all go it alone...or we pave a strong path for our people and for the next generation,” said President of the European Commission, Ursula von der Leyen.

“To protect lives and livelihoods, repair the Single Market, as well as to build a lasting and prosperous recovery, the European Commission is proposing to harness the full potential of the EU budget. Next Generation EU of €750 billion as well as targeted reinforcements to the long-term EU budget for 2021-2027 will bring the total financial firepower of the EU budget to €1.85 trillion," she added.

The European Commissioner for Economy Paolo Gentiloni said later that the EU is allocating a €750 billion recovery package to its member states, out of which €500 billion would be allocated as grants while the rest will be loans. It is expected that EU member states can withdraw these funds in January next year.

Obviously, this is a massive stimulus for the embattling economies. Investors are seeing this as a “whatever it takes” signal from the EU that is likely to help companies get through this rough patch. As a result, the DAX Index has been trading higher constantly in the last week to return to 12000 for the first time since early March. 

The price action is now trapped between the two important weekly moving averages around the 12000 mark. A break above this level would make DAX even more bullish than it currently is.

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