Key Talking Points:
- DAX 30 struggles to keep bullish momentum
- German IFO Business data falls unexpectedly
The DAX 30 is dipping lower again to start the new week after an impressive rebound at the end of last. A week ago it was concerns about a sharp rebound in infections that caused sentiment to sour, and today it seems to be a tightening of regulations in China, causing a negative session in Asia, spilling over into Europe at the open.
Data out this morning in Germany showed the IFO Business climate index fall unexpectedly in July, likely on the back of ongoing concerns regarding Covid infections and supply chain constraints on the back of recurring self-isolation periods. The hospitality and tourism sectors fear a fourth wave of infections will ruin the rest of the summer season whilst manufacturers were faced with rising commodity prices, which was hurting profit margins.
DAX 30 Daily chart
Last week’s rebound has reset oversold conditions on the stochastic oscillator for the DAX 30 which allows for a further pullback to consolidate. The RSI is sitting in the middle of its range so we could see a move in either direction consolidate but the tip is dipping slightly, which suggests further weakness ahead. Last week’s drop saw the RSI at its lowest level since November 2020 but it still wasn’t enough to bring the indicator below the 30 level which would have likely led to a stronger bearish reversal.
The current price is stagnating around the centre-point of its recent range and there seems to be some hesitation to break down lower so we may see stronger support arise again at the 100-DMA (15,453) which is in confluence with the 127.2% Fibonacci extension from the Feb 2020 drop. That said, as long as the DAX 30 stays below its ascending trendline, currently at 15,810, it is at increased risk of a bearish reversal consolidating below 15,000.
The earning’s calendar is running hot this week with key releases from the likes of Apple, Alphabet, McDonald’s, Facebook, and Amazon; as well as the latest policy meeting from the Federal Reserve on Wednesday.
Earning’s calendar prepared by Margaret Yang.
— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin