- Eurozone Global Services PMI Data mixed.
- Retail sales in the Eurozone Continue to Slide.
- Geopolitical Concerns Linger.
DAX 40: Rises as Sentiment Shifts Back and Forth, Nancy Pelosi Wraps up Taiwan Visit.
The DAXopened lower in European trade before a bounce allowed it to end the session in the green. Investors weighed a fresh bout of corporate earnings while a host of Eurozone data failed to inspire. A change in sentiment was visible in Tuesday’s US session as investors fled to havens with the USD in particular a winner, while European trade this morning benefitted from the news that US House Representative Nancy Pelosi is wrapping up her Taiwan visit. Risk sentiment was hit yesterday by U.S. House of Representatives Speaker Nancy Pelosi’s visit to Taiwan, a move that threatened to further dent Sino-U.S. relations and ramp up political tensions in Asia. Beijing claims the island as part of its territory and strongly opposed the visit, given that Ms. Pelosi is the highest-ranking U.S. official to visit the island in 25 years.
US Federal Reserve officials meanwhile dismissed suggestions of a ‘pivot’ by the Fed with Cleveland Fed President Loretta Mester saying that she wants to see “very compelling evidence” that month-to-month price increases are moderating before declaring that the central bank has been successful in curbing inflation. These sentiments were shared by Fed Members Mary Daly and Charles Evans.
German exports rose for the third month in a row, beating forecasts for a 1% increase and pushing Germany’s seasonally adjusted trade surplus to 6.4 billion euros ($6.51 billion) in June, well above consensus for a 2.7 billion euro surplus. Economists have cautioned that much of the increase was likely due to soaring prices. We had a mixed bag of EU S&P Global Services PMI with Germany now in contraction territory. Overall, the Eurozone print beat estimates coming in at 51.2. The drop in Eurozone retail sales confirms worries that household consumption could continue to slump. Sales fell by -1.2% month-on-month in June, rounding out a serious contraction for the quarter.
The index remained above key levels with losses capped as second quarter earnings results season progressed. Infineon (IFXGn) stock rose 0.9% after the German supplier of microchips to the auto industry lifted its full-year outlook as it posted a 33% year-on-year increase in quarterly revenue.On the flip side, BMW’s (BMWG) stock fell over 5% after the German auto giant warned of a highly volatile second half, citing challenges from inflation and potential gas shortages as well as ongoing supply chain bottlenecks.
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DAX 40 Daily Chart – August 3, 2022
From a technical perspective, last week Friday saw a monthly candle close as a bullish candle of a level of support. We closed above the 50-SMA while at the same time maintaining a bullish structure (higher highs and higher lows) on the monthly timeframe. The daily timeframe saw a doji candlestick close yesterday as sentiment shifted in the US session. We currently trade between the 50 and 100-SMA with 13300 providing significant daily support. We maintain a bullish structure on the daily while only a break and candle close below the most recent lower high 13030 will result in a change of structure. Should we push higher resistance is provided by the 100-SMA which coincides with the 61.8% fib level around 12773.
DAX 40 1H Chart –August 3, 2022
The 1H chart on the other hand saw a pullback during yesterday’s US session which surrendered the day’s gains. This morning saw a pullback before a bounce of the 100-SMA before breaking immediate 1H highs, a sign of a change in momentum as we pivot to more bullish price action. As choppy market conditions remain, the range between the week’s high and intraday support may provide an opportunity, while a break below support opens up the possibility of further retracement back towards the trendline.
Key intraday levels that are worth watching:
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter:@zvawda