DAX
The DAX index is trading 1.65% lower on this German bank holiday, as downbeat German Manufacturing PMI weight on the sentiment of investors on the German stock exchange. All around Europe, manufacturing PMI data are lower, confirming the fact that factory activity in the Eurozone is yet to pick up.
Data from Markit this Monday indicate that the German Manufacturing PMI for May 2020 (final) came in at 36.6, which was less than the 36.8 that the markets had expected and also lower than the previous figure of 36.8.
Staff cuts (the deepest in more than a decade) and factory closures as a result of the coronavirus pandemic in May ensured that the factory output and new orders fell sharply, extending the record drops seen in April. Output expectations continue to remain profoundly negative amid a sustained slump in demand.
The manufacturing sector’s work backlogs also continued to fall sharply, and the rate of job losses continue to accelerate at the fastest pace seen last in May 2009. Purchase of raw materials and semi-finished goods also continued to fall sharply, rounding off a generally dismal manufacturing PMI report.
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The downtick in the price action on this low-volume trading day has resulted in the DAX index now challenging the lower barrier of the evolving rising wedge formation. From a technical perspective, the rising wedge usually leads to a bearish outcome. If the negative sentiment is sustained, leading to a breakdown of the wedge, it may be possible for the DAX Index to attain the immediate support at 11391.752, where previous lows of 22 March and 15 August 2019 are found. We also have a role reversed high at this point, which occurred on 4 February 2019. If this new support fails to hold up, the price may push all the way down towards 10376.37, as price seeks to achieve the measured move from the wedge’s breakdown point. However, attainment of this target depends on the ability of sellers to surmount support levels at 11044.72 and 10839.07.
On the flip side, recovery of bullish sentiment allows the index to return to the 11825.30 resistance. Further price advance opens the door for the attainment of 11995.83, with 12432.83 remaining a valid upside target. This move would invalidate the rising wedge pattern. Traders on the DAX Index may be watching out for ECB’s action on Thursday, so light volume trading is a possibility as well.