FxWirePro: Eurostoxx50 likely to decline 6-7 percent as key support broken

The ongoing geopolitical crisis between the United States and North Korea has triggered much awaited and much needed selloffs in the stock market, which over the past several months were showing no signs of backing down.

The European blue chip index, Eurostoxx50 began its bull run in July last year, when it made a bottom around 2670. The Bull Run gained pace after the election of Donald Trump in the United States and as signs of growth in Europe became more visible. Since the election, Eurostoxx50 flew more than 27 percent to test resistance around 3700 by April. It was the highest level for the index since July 2015. Since April, despite diminishing political risk in the region, the index failed to break into higher highs and has been consolidating in a narrow range of 200-260 points.

The current geopolitical crisis and appreciated euro have finally led the index in breaking a crucial support 3450 area. We expect the index to correct further around 6-7 percent over the course of this year and reach around 3200.