Last week popular trades were sacrificed in the global risk sell off. The Germany 40 index fell 9% on the week to close at 20,344, a level last seen in early January. The rush into the relative safety of bonds and cash on Thursday/Friday in response to President Trump’s announcement of reciprocal tariffs of 20% on the EU ensured the Germany 40 index moved into correction territory. This is officially a dip of 10% from its previous high of 23,479, which amazingly was only seen 3 weeks ago on March 18th.
The negative mood has carried over into early trading on Monday with the Germany 40 experiencing a gap open lower, which has seen it trade to a new low at 19,592 before finding some initial buying interest again.
Looking forward, US reciprocal tariffs, retaliation and trade war escalation may well be top of traders’ agendas again. The latest round of US tariffs are due to kick in on Wednesday April 9th, making this date potentially pivotal in helping traders to determine whether President Trump is using them as a negotiating tool or is really committed and in it for the long haul.
Also important could be the strength of retaliation from the EU. Weekend news has highlighted a raft of potential measures, ranging from imposing its own tariffs on US imports, higher taxes on US companies or even specifically targeting big American technology companies.
We saw on Friday, what China's strong retaliatory response did to risk sentiment, after the world’s two biggest economies escalated their trade war. A strong response from the EU may have similar consequences, while a more measured approach may provide some support for the Germany 40, and other European indices. This will only become clearer when events occur, and price action can be judged in real time.
Technical Update: Sentiment Changes Everything
A recent theme supporting the Germany 40 index was rotation out of US markets into German assets (i.e. selling of US stocks to reinvest in German companies), which helped maintain the positive price action seen over the first 2 ½ months of 2025.
However, when sentiment changes as dramatically as it appears to have done last week, traders switch to a ‘sell all stocks’ scenario, meaning nothing is safe from capitulation, with even the recent stronger performers, such as the Germany 40, experiencing strong selling pressure.
This activity was reflected within the Germany 40 index by sharp price declines that first saw closing breaks under support provided by the March 11th last correction low at 22240. This then culminated in the sharp acceleration to the downside seen after Wednesday’s reciprocal tariff announcement from President Trump.
What Are The Longer Term Potential Implications for the Germany 40 Index?
Last week’s and so far, this morning’s lower opening, has seen breaks under what would normally be viewed by traders as possible important support, represented by the 38.2% and 50% Fibonacci retracement of August 5th, 2024, to March 18th, 2025, strength. These levels stood at 20945 and 20290 respectively. This may now lead to a more extended phase of price weakness, although it’s not guaranteed.
If this were to be the case traders may begin to look for deeper downside levels which might be viewed as the next potential support within the current decline. It might be argued that this morning’s opening level has already seen a test of a first support at 19653, which is the December 20th session low. However, if it were to give way, it might then be the 61.8% Fibonacci level which stands at 19436, that may become the next downside focus.
How About Potential Resistance Levels?
After such a sharp decline in price over a relatively short period of time, it’s possible to see an upside recovery develop, and it shouldn’t be forgotten that there might be potential for this to occur at some point over the course of the coming week.
However, what might now be viewed as possible resistance to any price bounce?
Friday’s low trade stands at 20318 and if any potential rallies see tests of this level, how it is defended on a closing basis may be important. Successful upside breaks may be a sign that a more extended price rally is materialising. The focus could then switch to a potential stronger resistance at 21076, which is the 38.2% Fibonacci retracement of the March/April weakness.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
The negative mood has carried over into early trading on Monday with the Germany 40 experiencing a gap open lower, which has seen it trade to a new low at 19,592 before finding some initial buying interest again.
Looking forward, US reciprocal tariffs, retaliation and trade war escalation may well be top of traders’ agendas again. The latest round of US tariffs are due to kick in on Wednesday April 9th, making this date potentially pivotal in helping traders to determine whether President Trump is using them as a negotiating tool or is really committed and in it for the long haul.
Also important could be the strength of retaliation from the EU. Weekend news has highlighted a raft of potential measures, ranging from imposing its own tariffs on US imports, higher taxes on US companies or even specifically targeting big American technology companies.
We saw on Friday, what China's strong retaliatory response did to risk sentiment, after the world’s two biggest economies escalated their trade war. A strong response from the EU may have similar consequences, while a more measured approach may provide some support for the Germany 40, and other European indices. This will only become clearer when events occur, and price action can be judged in real time.
Technical Update: Sentiment Changes Everything
A recent theme supporting the Germany 40 index was rotation out of US markets into German assets (i.e. selling of US stocks to reinvest in German companies), which helped maintain the positive price action seen over the first 2 ½ months of 2025.
However, when sentiment changes as dramatically as it appears to have done last week, traders switch to a ‘sell all stocks’ scenario, meaning nothing is safe from capitulation, with even the recent stronger performers, such as the Germany 40, experiencing strong selling pressure.
This activity was reflected within the Germany 40 index by sharp price declines that first saw closing breaks under support provided by the March 11th last correction low at 22240. This then culminated in the sharp acceleration to the downside seen after Wednesday’s reciprocal tariff announcement from President Trump.
What Are The Longer Term Potential Implications for the Germany 40 Index?
Last week’s and so far, this morning’s lower opening, has seen breaks under what would normally be viewed by traders as possible important support, represented by the 38.2% and 50% Fibonacci retracement of August 5th, 2024, to March 18th, 2025, strength. These levels stood at 20945 and 20290 respectively. This may now lead to a more extended phase of price weakness, although it’s not guaranteed.
If this were to be the case traders may begin to look for deeper downside levels which might be viewed as the next potential support within the current decline. It might be argued that this morning’s opening level has already seen a test of a first support at 19653, which is the December 20th session low. However, if it were to give way, it might then be the 61.8% Fibonacci level which stands at 19436, that may become the next downside focus.
How About Potential Resistance Levels?
After such a sharp decline in price over a relatively short period of time, it’s possible to see an upside recovery develop, and it shouldn’t be forgotten that there might be potential for this to occur at some point over the course of the coming week.
However, what might now be viewed as possible resistance to any price bounce?
Friday’s low trade stands at 20318 and if any potential rallies see tests of this level, how it is defended on a closing basis may be important. Successful upside breaks may be a sign that a more extended price rally is materialising. The focus could then switch to a potential stronger resistance at 21076, which is the 38.2% Fibonacci retracement of the March/April weakness.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.