German Chancellor Angela Merkel introduced a minimum penalty for not following face mask rules and lengthened the ban on major public events until the coming year.”.
The yield spread between Italian government bonds and German Bunds has widened since hitting a post covid crisis low in mid-August in a sign that it is not just Merkel who is concerned over covid developments..
The widening of the yield spread which is considered a risk-gauge has coincided with the DAX 30 failing to push back up to fresh highs, and a jump in Covid-19 cases.
Local coronavirus developments could drive the risk outlook for regional risk assets in the near term, particularly given the ECB’s wait and see mode..
German 10-Year Bunds Daily Chart – March Downtrend Under Pressure
The German 10-year Bunds (aka Europe’s safe haven), appear to be setting up for a move northwards to fresh monthly highs after finding support at 104, the psychologically handle and climbing over the 21-day (104.65) and 50-day (104.81) moving averages.
The March downtrend limits upside potential. However, the easiest path has a positive bias as the RSI and MACD indicators move into bullish territory.
The price has so far failed to break through confluent resistance at the monthly high (105.18) and March downtrend, so easing back could be on the cards in the near term.
A daily close below 50-DMA (104.81) could spark a selloff to confluent support at the 38.2% Fibonacci (104.28) and 200-DMA. A break through here open the door to 61.8% Fibonacci (103.23) .
On the other hand, a daily close above the monthly high (105.18) could open the door to the April high (106.00) and would likely go hand in hand with a period off risk aversion and a selloff in Germany’s benchmark DAX 30 index.