German Elections Market Overlook

AfD's risk to EU:
The risk-on sentiment continues this week sending the Dow Jones and S&P 500 to record levels putting stress on safe haven options such as Gold and the Japanese yen.
Euro zone equities still seem to be experiencing bullish sentiment, while the market’s attention is still directed towards The German Election taking place next Sunday.

Merkel's Chance
While Merkel's CDU/CSU alliance definitely increased her share of the polls, her chance to win is still high currently near 37% comparing with the Social Democratic Party (SPD) led by Martin Schulz which is expected to gain about 23% of the Bundstag seats.

We should mention here that Merkel's chance increased considerably last May following the defeat of the far-right populist Marie Le Pen in the French presidential elections which have watched alignment against the polarization direction in EU.

Merkel has been criticized earlier for opening Germany to immigration but now the situation is different and German society’s approval of the immigration has increased - underpinning Merkel's situation in the face of the Right-wing nationalist party, Alternative for Germany (AfD) which is expected to gain 9% of the Bundstag seats.

Af's Threat
AfD could gather momentum due to the immigration waves of 2015 and 2016 which some perceived as threatening to the EU, while the recent debate between Merkel and Schulz has shown how many points the two party leaders have in common - issues like condemning Erdogan's policies and refusing Turkey's entrance to the EU.

Even the discrepancy between the 2 candidates about the flow of immigration into Germany, is relatively minor as it has to do more with the timing of accepting these waves of immigrants.
The debate which ran on Sep. 3 has shown that Schulz can be the deputy of chancellor Merkel in her fourth term instead of being a direct opponent.
Beyond the primary election race between the CDU and SPD, markets will be closely watching how many seats AfD can gain compared to the number of seats the CDU/CSU and SPD will claim. This is because the AfD is yet another member of the slew of euro-skeptics that have been cropping up around the Union.

So, the single currency can go up higher in light of a strong defeat of the AfD and bigger number seats are won by the CDU/CSU, but if this gap is smaller though, then the Euro’s price could potentially drop, as the Afd is a strong opponent of both the EU and a globalized economy.


EURUSD Daily Chart:


EURUSD bouncing up from 1.1837 kept it above 1.1822 supporting level but this rebound is still limited below 1.20 psychological level satisfied by reaching only 1.1987 last Friday.

EURUSD is now trading close to 1.1970 level in its Fifth day of consecutive being below its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.2059.

EURUSD retreated from 1.2092 on Sep. 8, after getting over its previous high at 1.2070 which has been formed on last Aug. 29 to avoid forming a lower high below 1.2070 and keep the pair vulnerable to the upside.

EURUSD is still underpinned by forming series of higher lows which have started with its formed bottom at 1.0339 on the third day of this year to be the lowest level since December 2002.

EURUSD could gather higher momentum by breaking out its previous resisting level at 1.1616 which capped the pair on May. 3, 2016.

After rising from its formed bottom at 1.1569 on last Apr. 10, EURUSD succeeded to maintain until now its existence above its daily SMA50, its daily SMA100 and its daily SMA200.
EURUSD daily RSI-14 is referring now to existence inside the neutral region reading 58.554.

EURUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having its main line in the neutral region at 69.930 leading to the upside its signal line which is at 50.034.
Important levels: Daily SMA50 @ 1.1788, Daily SMA100 @ 1.1487 and Daily SMA200 @ 1.1065

Support and Resistance:
S1: 1.1822
S2: 1.1662
S3: 1.1612
R1: 1.2092
R2: 1.2271
R3: 1.2599

Deutsche Bank Daily Chart:

Deutsche Bank stock failed to sustain a place above €14 level to edge lower for trading currently close to €13.85, after limited rebounding to €14.28 from its formed bottom at €13.12 on Sep. 6.

After forming that bottom, Deutsche Bank stock could spend 8 consecutive days of being above its daily Parabolic SAR (step 0.02, maximum 0.2) which has been at €13.453 yesterday.

Deutsche Bank stock is still undermined by continued being below its daily SMA50, its daily SMA100 and its daily SMA200, as it faced difficulty to rebound higher than €14.28 which is now forming a lower high below its formed resistance at €14.77 on last Aug. 16.

Deutsche Bank daily RSI-14 is referring now to lower existence inside the neutral region reading 46.389.

Deutsche Bank daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having now its main line in its neutral region at 55.084 leading to the downside its signal line which is at 72.730, after peaking up inside the overbought territory above 80.
Important levels: Daily SMA50 @ 14.70, Daily SMA100 @ 15.47 and Daily SMA200 @ 16.46

Support and Resistance:
S1: 13.12
S2: 12.00
S3: 9.89
R1: 14.28
R2: 14.77
R3: 15.66



DAX30 Daily chart:

DAX30 could extend its rebound from 11866 to 12614.24 which is forming now a lower high below last Jul. 13 peak at 12678.

DAX30 is still above its Daily SMA50, after it could form an intermediate support at 12242 during its rising from 11866.

DAX30 kept its being above its Daily SMA100, while it is still existing above its Daily SMA200 since its bottoming out at 12032.48 on Sep. 4.

DAX30 daily RSI is referring now to existence inside the neutral territory at 65.004.

DAX30 daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having its main line in its neutral region at 72.806 leading to the downside its signal line which is still inside its overbought region above 80 at 82.945.

Important levels: Daily SMA50 @ 12277, Daily SMA100 @ 12465 and Daily SMA200 @ 12132

Support and Resistance:
S1: 12242
S2: 12032
S3: 11866
R1: 12614
R2: 12567
R3: 12678

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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