The expected coalition
The most recent ZDF poll published last Friday showed that Merkel's CDU/CSU coalition is leading with 39% support, While the Forsa poll sees that CDU/CSU has retreated to 36% and the SPD is still standing at 23%.
German equities are still underpinned by optimism about the country’s economic outlook, largely due to the pro-business coalition of the CDU/CSU being in the lead.
CDU/CSU and SPD
If the CDU/CSU and the Social Democratic party (SPD) government is preserved in the next term, this can open the door for Martin Shultz's inflation plans.
The DAX30 we also see an influx, as industrial stocks such as Siemens, Bosch, Daimler, Volkswagen and BMW due to the coalition’s positive stance on domestic industrial production.
After the recent September 3rd debate Schulz is inching closer to the position of deputy chancellor to Merkel during her fourth term.
CDU/CSU, The Greens and FDP
A coalition between CDU/CSU, The Greens and The Free Democratic Party FDP is still very plausible.
FDP party is looking for more tax cuts and easier legislation for the companies and which is good news for corporations, but the FDP has shown disapproval for Germany’s de facto rule in EU.
DAX30 will see a boost by this coalition also underpinning the demand for equities in several industries, especially for financial institutions such as Commerz Bank and Deutsche Bank.
Avoiding the AfD
There are no signs whatsoever that the far-right AfD will be part of any coalition.
At the moment though, the latest polls are showing a meager 9% gain. The far-right, euro-skeptic, anti-immigration party is still likely to hold seats in the Bundestag.
Markets will likely react negatively to this bringing down the EUR, as the party has given no clear economic package as its populist platform mainly focused on the 2015 and 2016 waves of immigrants and asylum seekers.
The worst possibility
A tightening gap between CDU/CSU and its counterparts is the worst possible scenario for the EUR, as it will destabilize Germany politically; splitting the Bundestag leaving it unable to reach an easy decision in relation to bailing out indebted countries in the EU. This in turn would destabilize the Union at large creating a volatile environment which will likely result in investors selling off the one-currency.
EURUSD Daily Chart:
EURUSD came under downside pressure in the recent hours to form a lower high at 1.2032 below its peak at 1.2092 which has been formed on Sep. 8.
EURUSD contained most of its bouncing up from 1.1837 by relatively high downside momentum can expose 1.1822 supporting level to be broken over the short term.
EURUSD is now trading close to 1.1885 level in its seventh day of consecutive being below its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.2041.
EURUSD is still underpinned by forming series of higher lows which have started with its formed bottom at 1.0339 on the third day of this year to be the lowest level since December 2002.
After rising from its formed bottom at 1.1569 on last Apr. 10, EURUSD succeeded until now to maintain its existence above its daily SMA50, its daily SMA100 and its daily SMA200.
EURUSD daily RSI-14 is referring now to existence nearly in the middle of the neutral region reading 50.103.
EURUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having its main line in the neutral region at 43.043 leading to the downside its signal line which is at 59.392.
Important levels: Daily SMA50 @ 1.1808, Daily SMA100 @ 1.1507 and Daily SMA200 @ 1.1079
Support and Resistance:S1: 1.1822
Deutsche Bank Daily Chart:
Deutsche Bank stock extended its slide yesterday to €13.50 from €14.28 which limited its rebounding from its Sep. 6 bottom at €13.12.
Deutsche Bank stock spent yesterday its first day of being below its daily Parabolic SAR (step 0.02, maximum 0.2) which has been reading at €14.28 yesterday.
Deutsche Bank stock is still undermined by continued being well below its daily SMA50, its daily SMA100 and its daily SMA200, after facing difficulty to rebound higher than €14.28 which is now forming a lower high below its formed resistance at €14.77 on last Aug. 16.
Deutsche Bank daily RSI-14 is referring now to lower existence inside the neutral region reading 40.818.
Deutsche Bank daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line in its oversold region below 20 at 13.128 leading to the downside its signal line which is still inside the neutral area at 32.248, after peaking up inside the overbought territory above 80.
Important levels: Daily SMA50 @ 14.59, Daily SMA100 @ 15.41 and Daily SMA200 @ 16.44
Support and Resistance:S1: 13.12
DAX30 Daily chart:
After footing on 12479, DAX30 could extend its rebound from 11866 to be trading now at 12630 in its day number 12 of continued being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading now 12310.
DAX30 which is now at a closer place to last Jul. 13 peak at 12678 is still underpinned over the short term by being above its Daily SMA50, after it could form an intermediate support at 12242 during its rising from 11866.
DAX30 is also underpinned over longer term too by keeping existence above its Daily SMA100 and also it has been above its Daily SMA200 since bottoming out at 12032.48 on Sep. 4.
DAX30 daily RSI is referring to existence at a higher place inside the neutral territory at 67.227.
DAX30 daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having its main line in its neutral region at 78.503 to be at a closer place to the overbought area above 80 leading to the upside its signal line which is lower inside the neutral region at 72.495.
Important levels: Daily SMA50 @ 12276, Daily SMA100 @ 12467 and Daily SMA200 @ 12150
Support and Resistance:S1: 12479
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.