DAX Index turns south as Merkel warns of a difficult period ahead

The DAX Index has extended last week’s losses to trade about 0.8% lower in the current week. The number of new COVID-19 infections has continued to surge on a daily basis across the continent, prompting officials to ask for responsible behaviour. 

Fundamental analysis: Difficult months are ahead – Merkel

There has been a substantial increase in the number of new coronavirus cases and a few European countries have taken new measures in a bid to inhibit the second wave. A large number of EU member states have imposed new measures including early closing of bars but with the number of infections increasing at such a rapid pace, some countries are also considering closing schools and other institutions.

After Germany reported a new peak of more than 7,800 of new coronavirus cases on a single day, the country’s Chancellor Angela Merkel said Germans should expect a challenging period ahead and asked them to take all the necessary measures and curb the spread of the deadly virus.

“Difficult months are ahead of us,” Merkel said in her video podcast. “How winter will be, how our Christmas will be – that will all be decided in these coming days and weeks, and it will be decided by our behaviour.”

Elsewhere, Italian Prime Minister Giuseppe Conte is also supposed to introduce new measures on Sunday to fight the second wave and is considering school closures. Italy too posted a new daily record of new cases on Saturday. 

On Friday, 150,000 new coronavirus cases were reported in one day, and only a week before that, Europe reached 100,000 new cases on a daily basis for the first time since the outbreak. Data showed that more than half of the new cases this week were registered in the United Kingdom, France, Russia, Netherlands, Germany and Spain.

However, such a massive difference between the number of new cases in Europe and other parts of the world is partly because Europe has been doing much more testing than during the first wave. 

Technical analysis: DAX turns south 

The DAX index price has continued its downtrend that started at the beginning of the last week to trade at 12809 or 0.35% lower on the day. The weekly losses now stand at about 0.8%.

DAX Index daily chart (TradingView)

The index is now approaching the key weekly support at 12760, where the 200-DMA is located. A break of this area would open the door for a deeper pullback toward 12500.

Summary

European countries have been taking new steps to curb the spread of the second wave of coronavirus and Angela Merkel has warned Germans of a challenging period ahead. DAX Index has turned lower in risk-on trading sentiment. 

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