DAX Opens Higher After PBoC Cuts Rates
The People’s Bank of China cut rates overnight in a surprise move that sent the Hang Seng index higher by 1.7%.
The Chinese central bank took action to help boost the marginal growth in the economy. The PBoC cut the 1-year lending rate to 3.35% from 3.45% and the 5-year lending rate from 3.95% to 3.85%.
The central bank also cut the 1-week repo rate, for the first time in over a year, from 1.8% to 1.7%. The cuts come after last week’s GDP data showed growth had slowed to the lowest level seen in the last 5 quarters.
The DAX benefitted from the expansionary news in China and is up 0.56%. China is Germany’s largest trading partner, so any boost in the Chinese economy is also positive news for the DAX.
With the ECB meeting out of the way, the market is now turning its eyes to the FOMC meeting for July 31 – August 1. Analysts expect the Fed to keep rates on hold, as many officials have stated language to indicate such a stance.
The real volatility will come from the following press conference on August 1. With all ears on Fed Chair Powell’s wording in terms of forward guidance.
I expect he’ll keep the same refrain in terms of acting on sufficient data. However, the following questions from the press may pry open some interesting remarks.
Technical View
The day chart below for the DAX shows a market that is still in a sideways trend. With the market still inside the Ichimoku cloud, and the RSI hovering around 50. To get an idea for the next trend we would need to see a breakout from the cloud at least.
The breakout would give the initial momentum. However, to really see a new trend take hold of the market, we would need a close above the all-time high or below the previous dip to 17,939 (light green line).
For now, immediate resistance can be found at the topside of the cloud and the at 18,601 (black line), which coincides with a previous high. The support levels are at the bottom of the cloud, and then the previous dip to 17,939.
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