DAX Return to 16,000 Hinged on the German Economy and the Fed

Highlights

• It was a bullish end to a bearish week for the DAX on Friday, gaining 0.37% to wrap up the day at 15,952.
• German factory orders and the US Jobs Report delivered a bullish session.
• The European economic calendar and central bank chatter will draw interest today. German industrial production and Fed commentary influence.

It was a bullish Friday for the DAX, which gained 0.37%. Partially reversing a 0.72% loss from Thursday, the DAX ended the week down 3.14% to 15,952. Significantly, the DAX ended the day at sub-16,000 for the second time since July 11.

Economic indicators from Germany provided support early in the European session. Factory orders surged for a second consecutive month, easing immediate fears of an extended economic recession.

Corporate earnings failed to provide support despite Commerzbank delivering upbeat H1 results and a positive outlook. The Bank also rolled out plans for share buybacks.

Later in the European session, the US Jobs Report delivered late support.

However, a bearish US session capped the upside for the DAX. The NASDAQ Composite Index slipped by 0.36%, with the Dow and the S&P 500 seeing losses of 0.43% and 0.53%, respectively. While Amazon.com (AMZN) delivered support, Apple (AAPL) dragged on a forecasted slide in sales.

Economic Indicators Delivered Support

It was a relatively busy day on the European economic calendar, with German factory orders in focus. Factory orders surged 7.0% in June, following a 6.2% jump in May. Economists forecast a 2% fall in factory orders.

Later in the European session, the US Jobs Report was also market-friendly. The US unemployment rate fell from 3.6% to 3.5%, while average hourly earnings rose by 4.4% year-over-year. Economists forecast an unemployment rate of 3.6% and average hourly earnings to increase by 4.2%. However, a 187k increase in nonfarm payrolls signaled a moderately softer labor market. Economists forecast nonfarm payrolls to rise by 200k.

The Market Movers

It was another mixed session for the auto sector. BMW led the way, rising by 1.07%, with Mercedes-Benz Group gaining 0.48%. Continental AG and Porsche rose by 0.28% and 0.11%, respectively, while Volkswagen fell by 0.22%.

It was also a mixed session for the banks. Commerzbank fell by 2.64%, while Deutsche Bank ended the day up 0.74%. Commerzbank was the worst performer on Friday.

The Day Ahead for the DAX

This morning, German industrial production will set the tone. After the surge in factory orders over two consecutive months, weak industrial production figures would refuel recessionary jitters. Economists forecast a 0.4% decline in industrial production.

Later in the session, there are no US economic indicators influence. The lack of economic indicators will leave Fed chatter to move the dial. FOMC members Harker and Bowman are on the calendar to deliver speeches.

DAX Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The DAX sat below the 50-day (16,115) and 200-day (15,962) EMAs, sending bearish near and longer-term price signals.

Significantly, the 50-day EMA narrowed to the 200-day EMA, sending bearish price signals and supporting a DAX return to sub-15,750 to bring the 15,600 – 15,525 support band into play.

However, a DAX move through the 200-day EMA (15,962) and the lower level of the 16,000 – 16,080 resistance band would give the bulls a run at the 50-day EMA (16,115).

The 14-4H RSI sits at 38.41, signaling bearish sentiment, with selling pressure overweighing buying pressure. Significantly, the RSI aligns with the EMA, supporting a return to sub-15,750 to bring the 15,600 – 15,525 support band into play.

For a look at the economic events, check out our economic calendar.