GER30, H4 and Daily
Eurozone HICP inflation was confirmed at 1.7% y/y in line with the preliminary number and up from 1.4% y/y in the previous month. The variations over the March/April period were related to the different timing of Easter this year, which impacted holiday related prices and saw services price inflation falling back to 1.1% y/y in March, but bouncing back to 1.9% y/y in April. However, the uptick in April seems to go beyond holiday variations and with core inflation revised up to 1.3% y/y from 1.2% y/y reported initially, there may also be finally signs that higher wage growth is lifting selling prices, especially in the service sector.
This ties in with ECB comments that highlight underlying improvements in growth and inflation and backs our view that the ECB will refrain from cutting rates or re-opening QE, but markets are not convinced and Bunds remained near intraday highs after the numbers, with the 10-year yield still down -1.5 bp at -0.111%, after the release, amid a wider rally on bond markets.
European stocks correct, but DAX is still looking good. The German benchmark has corrected -0.75% so far today, but after yesterday’s rally is still holding above the 12200 and the 20-day SMA at the 12213 level.
Indeed, the improving trend this year continues to hold and on a technical level the index held up through this month’s turbulences. Earnings reports added Support so far this year and kept GER30 in an upchannel, which seems to be well supported by the 50-day SMA.
Support for the day could be set at the Wednesday’s peak, at 12130 level, while in the near term Support is at the 12160.20 area. A break below the 1st Support could retest the 50-day SMA at 11900. On the upside, immediate Resistance holds at the 61.8 Fibonacci retracement level at 12330, set on the 2018 decline. However, strong Resistance comes at year’s peak, at 12443 level.
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