U.S. trade tariffs tightened market conditions. Coeure said that “while the effects of any tariffs on output and inflation may take time to materialise, falls in equity prices in response to the U.S. announcement to impose a tariff on steel and aluminium, and prevailing uncertainty on the scope of any retaliatory measures, have already contributed to tighter financial conditions”. He warned that fears of a trade war have deed to the volatility in equity markets, which is not supportive for growth and employment. “A further adverse structural shock to productivity may lead us to be more often constrained in the longer term by the effective lower bound on nominal interest rates and to increase the need to resort to unconventional policy measures”. So the central bank is taking note and turns cautious again, which backs the view that Draghi will wait until July before confirming the phasing out of QE by the end of the month.
USA500 futures is off by over 1%. European stock markets are heading south as well, led by the GER30, which is down -0.42% as trade jitters flare up again, although early losses look muted compared to the slump in futures and yesterday’s near 3% gain and at 12,240 still firmly above the lows from last week, but also above the average over the last month.
The GER30 opened today 85 pips lower at 12,196.00. however the intra-day performance remain positive, since it manage to move higher on London open, while it remains above the 20-DAY MA at 12,170.95. In 1-hour chart more precisely, the asset is traded within the upper Bollinger Bands pattern, suggesting the positive momentum still holds. The latter along with the fact that technical indicators fluctuate in the positive area, confirm that bulls still remain in control despite weakness caused by Trade tensions. The RSI drifted lower during London open, however is sloping above neutral, while MACD lines present strong momentum to the upside, today.
Hence, as long as 20-DAY MA holds along with the immediate support area at 12,104.40 – 12,144.90, then we remain to the positive scenario for GER30.