European shares traded sharply higher on Tuesday, boosted by President Trump’s trade tweet and prospects of easier monetary policy from the ECB and Fed. The DAX which is sensitive to world trade developments soared 2.03% as President Trump stated that US-China trade negotiations would resume prior to their confirmed meeting at the G-20 summit next week. Separately on economic data, Germany and the Eurozone’s economic sentiment figures dropped well below expectations however were met with a dovish message from the ECB. President Draghi expressed the ECB’s willingness to deliver easier monetary policy to boost the region’s slowing economic growth which provided further support. While European markets will close ahead of today’s FOMC meeting, trade optimism should dominate sentiment and help keep the German Blue-chip Index afloat before picking up on Wall Street’s reaction to monetary policy projections.
The DAX exited its consolidation phase and rallied through resistance at 12200 to climb to a high of 12360 before ending at 12331 on Tuesday. The RSI reading has entered the overbought territory signaling a potential pullback should bullish momentum halt. Look for a break above the resistance of 12360 to offer bulls a test of the 12410 level followed by May’s peak at 12450. Failure to edge above the 12360 level should see the DAX consolidate gains above 12300, with a decline below this level required to target the lower support at 12250.