Senior Market Strategist

Total Content 192

Articles 176

FOMC minutes and the German DAX

By David Morrison  |  22/02/2018 14:33
This article looks at the fall-out from last night’s FOMC minutes and highlights some significant levels on the German DAX 30.

Wrong-footed again

It wasn’t the first time, and it certainly won’t be the last, that investors were initially wrong-footed by minutes from a Federal Reserve meeting. The major US indices shot higher and the dollar slumped as the headline-reading algorithms picked up on phrases suggesting a more-dovish-than-expected tone from the FOMC. The first takeaway focused on Fed members saying that they would continue to raise rates gradually as growth continued to pick up while there was no evidence that inflation would get out of hand.

Four rate hikes in 2018?

But this knee-jerk reaction reversed sharply as humans discerned a certain subtlety missed by the machines. It became apparent that Committee members were erring on the hawkish side given their expectations that GDP growth should accelerate thanks to additional fiscal stimuli from the Trump administration’s tax cuts and regulatory reform. Overall, it sounded as if the FOMC was preparing the markets for four 25-basis pint rate hikes in 2018, up from the three hikes forecast in the December Summary of Economic Projections. This saw bonds and equities sell off sharply with the yield on the key 10-year Treasury spiking above 2.95% to hit a fresh four-year high.

S&P closes on lows

The move saw the S&P 500 close on the low of the day, just above support (previously resistance) around 2,700. The index fell further after hours although it staged a modest recovery ahead of Thursday’s open. Traders will now have to decide if yesterday’s move was little more than a continuation of the corrective pull-back which has been taking place this week or an indication that global indices are due to undertake another substantive lurch lower.


All this is important to consider when looking at other global indices. Considering the German DAX there’s a few significant trading levels which stand out on the daily chart. Firstly, there’s a fairly strong area of resistance which comes in around 12,800. This acted as support on a number of occasions in the last quarter of 2017 and as resistance last summer. On the downside, there’s some mild support around 12,300 but that was sliced through earlier this month and looks unlikely to hold if we see another substantial sell-off emanating from the US. Instead, look at the area between 12,000 and 11,900. The former helped check the DAX’s rally in the spring of 2015 while the latter marks the 50% retracement of the rally from November 2016 (after the US Presidential Election) to January this year. If this fails to hold on a weekly basis then there’s very little further support until the index hits 10,800. 


Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and GKFX accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.


Author's Other Opinion & Analysis

Show More Articles


The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.


        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via