The main driver for this action came from recent developments in the Middle East last Friday, when the Pentagon launched an airstrike that killed Iranian commander Soleimani, sparking fears that a war between the US and Iran could be about to start, increasing chances of a broad risk-off mode and break below 13,000 points on the table.
In addition to that, White House advisor Peter Navarro mentioned during his CNBC interview that the US is "going to try to get something going with Great Britain, Vietnam, Europe and anybody else who wants to fairly trade with the United States of America".
If, based on these comments, speculation among market participants infer that Europe could be attacked with tariff announcement from the US in the near future, the German index could quickly see further selling pressure.
On the other hand; as the Fed to continues to flood markets with liquidity in the hopes of avoiding avoid a funding crisis, particularly in the repo market, (and will thus extend the Fed to new record highs by mid-January) the downside should be limited and only a drop below 13,080/100 points would significantly darken the technical picture on H1.
The main focus on the upside stays on 13,480/500 points, and a break higher should be considered clearly , making a test of the current all-time highs around 13,600 points likely.
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