The GER 40 Index Futures (EUREX: FDAX) are grappling with a challenging market environment influenced by mixed economic data from China and cautious commentary from European Central Bank (ECB) officials. The DAX is trading around 18,650, down 0.5% amid concerns over sustained high interest rates, as highlighted by recent remarks from ECB member Isabel Schnabel. Additionally, weak retail sales data from China is weighing on market sentiment despite stronger-than-expected industrial production figures.
Corporate earnings have also been a mixed bag, with Siemens and Infineon posting declines, while the banking sector shows resilience, led by gains in Deutsche Bank and Commerzbank. The market is also keenly awaiting the final eurozone inflation numbers, which could provide further insights into the ECB’s rate path beyond June.
Technical Analysis
The 4-hour chart shows the index is under selling pressure, currently trading at 18,730. The price action recently dipped below the slightly downward-sloping 20-SMA (green line), indicating a potential shift in momentum. However, it remains above the 50-SMA (blue line) and 100-SMA (orange line), suggesting some underlying bullishness.
The RSI (44.40) sits below the neutral 50 level, reinforcing the bearish bias. A sustained drop below the 50-SMA could open opportunities for short positions targeting the initial support at 18,450. A break below this level could see further declines towards 18,039 and even 17,608.
Conversely, a recovery above the 20-SMA could indicate a short-term bounce. This could present opportunities for long positions targeting the all-time high of 19,003. A decisive break above this level, potentially fueled by dovish Eurozone inflation data or ECB commentary, could extend the rally towards the 23.60% Fibonacci extension level (19,230) and even the 38.20% Fibonacci extension level (19,370).
Summary
The GER 40 Index Futures are navigating a complex landscape with cautious market sentiment driven by ECB commentary and mixed economic data from China. Technically, the index is at a critical juncture, with a potential for both bullish and bearish short-term movements. A break above the 20-SMA could revive bullish momentum towards 19,003 and beyond, while failure to hold above the 50-SMA might lead to a decline towards 18,450 and lower support levels. Market participants could closely watch upcoming eurozone inflation data and ECB statements for further direction.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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