DAX Eyes a Bullish Open with ECB Chatter and the Debt Ceiling in Focus

It was a bullish Wednesday session for the DAX. Reversing a 0.12% decline from Tuesday, the DAX gained 0.34% to end the day at 15,951.

Investors brushed aside economic indicators from the euro area, with progress towards a US debt ceiling deal delivering support. The upside came despite disappointing economic indicators from Germany and sticky inflation figures.

Economic indicators from the US took a back seat, with the markets brushing aside housing sector numbers. However, corporate earnings results and outlooks provided direction.

Commerzbank beat forecasts and raised its forecast for the current year. However, talk of a mild German recession in 2023 and the outlook dependent upon the Bank’s Poland unit and Swiss Franc mortgages left the share price in negative territory.

On Wednesday, the NASDAQ Composite Index rose by 1.28%, with the S&P 500 and the Dow seeing gains of 1.19% and 1.24%, respectively.

Investors Brush Aside Car Registration and Inflation

It was another busy day on the European economic calendar. Euro area car registrations and Eurozone inflation numbers were in focus.

The economic indicators were bearish. German car registrations tumbled by 27.9% in April, with car registrations in Italy and France falling by 25.2% and 27.5%, respectively.

Finalized Eurozone inflation figures were in line with prelim figures. The Eurozone annual inflation rate accelerated from 6.9% to 7.0%, while the core inflation rate softened from 5.7% to 5.6%.

According to Eurostat,

• Luxembourg registered the lowest annual rate (2.7%) compared with Latvia (15.0%), which had the highest inflation rate.
• Food, alcohol, & tobacco (+2.75 percentage points) had the highest contribution, followed by services (+2.21 pp), non-energy industrial goods (+1.62 pp). and energy (+0.38 pp).

Later in the session, US housing sector stats had no impact as investors responded to debt ceiling-related news.

The Market Movers

It was another mixed day for the auto sector. Volkswagen and Porsche saw losses of 0.07% and 0.31%, respectively. However, Mercedes-Benz Group and Continental ended the day with gains of 1.45% and 1.08%, respectively. BMW rose by 0.57%.

It was a mixed session for the banks. Commerzbank slid by 3.80%, while Deutsche Bank gained 0.87%.

The Day Ahead for the DAX

It is a quiet day ahead on the European economic calendar. There are no economic indicators from the euro area for investors to consider. The lack of stats will leave the DAX in the hands of the US economic calendar and debt ceiling-related news.

However, ECB Executive Board members Luis de Guindos and ECB President Christine Lagarde are on the calendar to speak today. Following the latest Eurozone GDP, inflation, and European Commission economic growth and inflation forecasts, forward guidance will move the dial.

Looking ahead to the US session, it is a relatively busy day on the US economic calendar. US jobless claims and the Philly Fed Manufacturing Index and sub-components will draw interest.

An unexpected slide in the Philly Fed Manufacturing Index would fuel recessionary fears. However, the devil will likely be in the details. Investors should consider the Philly Fed Prices, New Orders, and Employment sub-components.

While the economic calendar is busier, the markets should monitor FOMC commentary. Fed members Jefferson, Barr, and Logan will speak today, with debt ceiling-related news also of influence.

DAX Technical Indicators

Resistance & Support Levels

The DAX has to avoid the 15,935 pivot to target the First Major Resistance Level (R1) at 16,009. A move through the Wednesday high of 15,993 would send a bullish signal. However, the DAX would need US economic indicators, central bank chatter, and US debt ceiling talks to support a breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at 16,066. The Third Major Resistance Level (R3) sits at 16,197.

A fall through the pivot would bring the First Major Support Level (S1) at 15,878 into play. However, barring a risk-off-fueled sell-off, the DAX should avoid sub-15,850 and the Second Major Support Level (S2) at 15,804. The Third Major Support Level (S3) sits at 15,673.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 50-day EMA (15,858). The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 (15,878) and the 50-day EMA (15,858) would support a breakout from R1 (16,009) to give the bulls a run at R2 (16,066). However, a fall through S1 (15,878) and the 50-day EMA (15,858) would bring 15,850 and S2 (15,804) into view. A fall through the 50-day EMA would send a bearish signal.

The DAX Futures Sees Green

Looking at the futures markets, DAX was up 89 points, with the NASDAQ mini up by 5.25. However, the Dow was down by 25.

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