The German benchmark stock index futures, the Ger40 Futures (EUREX: FDAX), are on a roll. After back-to-back gains, they’re extending their rally in today’s session, climbing another 44 basis points.
This positive trend comes amidst signs of easing inflationary pressures in Germany, where wholesale prices fell by 1.8% year-on-year in April, following the previous month’s 2.6% decline. Additionally, business sentiment remains relatively stable. The IFO Business Climate Index held steady at 89.3 in May, with key sectors like manufacturing, trade, and construction showing signs of recovery. However, the services sector appears to be lagging.
Looking ahead, the release of Germany’s May inflation data on Wednesday, followed by the eurozone’s economic sentiment indicator and inflation data later in the week, will be crucial. These upcoming economic indicators could significantly impact the trajectory of the Ger40 Futures.
Technical
The Ger40 Futures have been trading in a robust uptrend, consistently above the 100-day moving average.
This uptrend saw support materialize at the 18033 level following a brief dip below the moving average, which subsequently led to a surge in the index futures, breaking above this critical technical indicator. However, when the price reached the 19003 level, overbought RSI conditions indicated a loss of momentum, resulting in a downturn.
This downturn was mitigated by the 38.20% Fibonacci Retracement level, which served as crucial intermediate support, sparking a bullish reversal. If the upward momentum continues, a retest of the 19003 resistance level is plausible. This resistance level remains a significant hurdle for the bulls. Conversely, if bearish pressures resurface, there is potential for the index futures to test lower levels, with the Fibonacci retracement levels providing key areas of interest for support.
Summary
The Ger40 Futures’ strong uptrend faces a critical test at the 19003 resistance level. With easing inflation and stable business sentiment, continued bullish momentum could push past this barrier. However, bearish pressures may lead to a retest of the 38.20% Fibonacci Retracement level for support.
Sources: Federal Statistical Office, Ifo Institute, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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