Consumer price pressures in Germany accelerated in April to 2.4% y/y, which marked the first uptick since December. Eurozone inflation meanwhile persisted at the same level (May preliminary due on Friday), while wages in the region increased in the first quarter. This has created some worries around the disinflation process and the central bank’s prospects for less restrictive stance.
GER30 extends its slide from the recent all-time peak into the third week as a result and now tests a crucial support area. It breaches the EMA200 (H4) threatening the 38.2% Fibonacci of its last leg up. This would pause the bullish momentum and create risk for deeper pullback towards the daily Ichimoku Cloud, but we are cautious around sustained weakness.
Recent European inflation data may have showed some persistence and European officials may have warned against back-to-back rate cuts, but the ECB is expected to become the first major central bank to pivot and slash rates next week. This shift towards looser monetary setting, along with Germany’s exit for recession, are supportive for the stock market. Furthermore, the RSI is oversold and if GER30 manages to hold the pivotal EMA200 and 38.2% Fibo, its bullish bias would be reaffirmed and could lead to new record highs.
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Stratos Europe Ltd (trading as “FXCM” or “FXCM EU”), previously FXCM EU Ltd (fxcm.com/eu):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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