The Ger 40 Futures (EUREX: FDAX) has staged an impressive recovery, shaking off a nearly 3% year-to-date loss to now trade flat for the year.
This turnaround was highlighted by a notable 1% gain in Wednesday’s trading session, indicative of renewed investor confidence. Germany’s manufacturing Purchasing Managers’ Index (PMI) played a pivotal role, climbing from 43.3 to 45.4 in January, potentially bolstering industrial stocks amid a brighter outlook for the manufacturing sector.
On the global stage, the weakening Greenback, shedding up to 50 basis points in the session, has spurred an increased appetite for risk assets. Traders appear to be adjusting their positions in anticipation of crucial economic data, including PMIs, jobless claims, and the eagerly awaited PCE Price Index—a key metric for the Federal Reserve’s inflation assessment. Additionally, the upcoming interest rate decision from the European Central Bank looms large, adding an element of anticipation as market participants keenly watch for cues that could influence the trajectory of Ger 40 Futures.
Technical
The Ger 40 Futures encountered a challenging start in 2024, succumbing to downward pressures that originated from a reversal at the 17123 level, marked by overbought RSI conditions and the formation of a resistance level. This decline was substantiated as the price breached the 100-day moving average, confining itself within a descending channel pattern—a clear signal of a prevailing downtrend.
However, a noteworthy turnaround unfolded at the 16464 level, fuelled by a rebound propelled by oversold RSI conditions. This resurgence triggered a breakout from the descending channel pattern and a repositioning above the 100-day moving average. The significance of this upward shift was further underscored by a breakthrough above the 61.80% Fibonacci Retracement Golden Ratio, validating the renewed optimism.
As the index futures hover in this newfound positive territory, the potential retest of the 17123 level becomes plausible if bullish momentum endures. Conversely, the Golden Ratio looms as a short-term point of interest to the downside, acting as a potential focal point should bears reassert their influence.
Summary
The Ger 40 Futures showcase resilience, erasing a 3% YTD loss, propelled by a robust manufacturing PMI and global economic factors. A rebound at 16464, breaking the descending channel and surpassing the 61.80% Fibonacci Golden Ratio, signals renewed optimism. The 17123 level retest is plausible with sustained bullish momentum, while the Golden Ratio acts as a short-term downside focal point.
Sources: S&P Global, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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