DAX, EUR / USD ignore missed German and European PMIs


GERMANY 40 (DAX), EUR / USD ANALYSIS

  • Weak German, French and European PMI.
  • DAX, EUR / USD overlooks economic data.
  • The DAX exceeds 15,600.
  • EUR / USD rectangle support tested.

FUNDAMENTAL CONTEXT OF THE EURO ZONE

GERMAN GIVES EU PMI’S A PRECURSOR

After yesterday FOMC decision to start declining later this year (November / December), markets are still considering the announcement of fed President Jerome Powell. The underlying environment will obviously remain extremely buoyant until then, so equities could continue to climb. The US dollar has gained slightly compared to euro who could be a refuge play as the maturity of Evergrande’s debt approaches. Germany (the strongest economy in the region) with France missed PMI forecast ahead of print from the EU which followed suit – see economic calendar below. The manufacturing and production sectors have collapsed mainly due to a shortage of supply which has resulted in bottlenecks as demand remains high. Although trading activity is slowing MoM, a bright spot is that the index remains above the median level of 50 and could be quickly reversed if the challenges on the supply side abate.

Source: DailyFX Economic Calendar

Attention will now turn to the Evergrande situation as well as the German elections at the weekend. The German elections are essential for the country, because the outgoing Chancellor Angela Merkel has built a solid base with her foreign peers (united foreign policy) which reinforces the attractiveness of the country in the business space. This is clear from the distribution of income generation over the Germany 40 Index (DAX) – refer to the diagram below:

BREAKDOWN OF EXPOSURE OF DAX REVENUES

EXPOSURE OF DAX REVENUES BY COUNTRY

Source: FactSet

TECHNICAL ANALYSIS

DAX DAILY GRAPHIC

GERMANY 40 DAY TABLES (DAX)

Graphic prepared by Warren Venketas, IG

A third consecutive day of earnings for the DAX Index were not hampered by poor German data and Euro PMI. Aligning with Fed Chairman Powell’s statement, European stocks are broadly positive today. The DAX found support alongside the mid-term (black) trendline in line with the oversold Relative Strength Index (RSI). Prices may encounter resistance at the 20-day (purple) EMA in the near term, but may test the recent high soon.

Resistance levels:

Support levels:

EUR / USD DAILY TABLE

EUR / USD DAILY CHART

Graphic prepared by Warren Venketas, IG

The daily EUR / USD graphic describes the minimal change after the announcement while Price action Pushes short term support back to 1.1680 (23.6% Fibonacci level). Highlighted in blue is the formation of a rectangle pattern which means traders will look for a confirming daily close above or below support or resistance for a breakout. close to oversold territory but could run out as the Federal Reserve’s accommodative outlook persists.

Resistance levels:

Support levels:

— Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas

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