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FxWirePro: Sell Eurostoxx50 targeting 3250

After two weeks of selloffs, the European blue-chip index Eurostoxx50 is higher this week. As can be seen from the chart that the bulls have pushed the price higher this week, as it bottomed close to the rising bullish trend line. The trend line, which has been in place since mid-2016, has already supported the price in August near 3360 when it declined steadily after reaching 3680 in May.

While the bigger trend still remains bullish, our calculations at FxWirePro suggests that the market is ripe for a short-term correction, like the one it experienced in the mid of the year. In addition to that, the ongoing political crisis and the rise of right-wing populism, whose latest victim was Germany would take a toll on the index. Last weekend, German Free Democrats (FDP) moved out of the months-long tri-party coalition talks casting a shadow the future of German Chancellor Angela Merkel, who was set to become the Chancellor for the fourth time and become the longest-serving German Chancellor.  

We expect the short-term selling to push the index towards 3250 area from the current rate of 3582. However, one must remain cautious as the rising trend line is not yet broken. The stop loss for the trade should be placed around 3720 area.

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