The Ger 40 Futures (EUREX: FDAX) market has seen a promising start to the year, trading 4.55% higher year-to-date with three consecutive weeks of gains.
However, Thursday’s trading session opened on a cautious note as weak data from Germany weighed on market sentiment. The decline in German factory orders for January, exceeding expectations at 11.3%, likely dampened investor confidence early in the session.
Attention now turns to the European Central Bank Interest Rate Decision, where policymakers are expected to maintain record-high interest rates amid the need for further evidence of a slowdown in inflation before considering rate cuts. Additionally, anticipation mounts for the release of the U.S. Nonfarm Payrolls on Friday, which is poised to influence risk sentiment and market dynamics.
Technical
The Ger 40 Futures market has exhibited an uptrend, supported by its position well above the 100-day moving average.
The rally was ignited at the 17069 level, driving the index futures higher, forming a support level. However, at the 17847 level, the uptrend lost steam as overbought RSI conditions signalled a potential exhaustion of buying momentum.
Consequently, a retracement ensued, with the index futures retracing to the 23.60% Fibonacci Retracement level. If this level proves to be a robust intermediate support, a resurgence in upside momentum could lead to a retest of the 17847 resistance level. On the contrary, if selling pressures intensify, the 38.20% Fibonacci Retracement level could emerge as the next significant point of interest to the downside.
Summary
Amidst anticipation surrounding the ECB interest rate decision and U.S. Nonfarm Payrolls, the Ger 40 Futures face cautious sentiment post-weak German data. Despite the recent uptrend, a pivotal resistance at 17847 and potential support at the 23.60% Fibonacci Retracement level reflect ongoing market interaction.
Sources: Federal Statistical Office, Reuters, Wall Street Journal, TradingView
Piece By Nkosilathi Dube, Trive Financial Market Analyst
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