DAX Set for a Bearish Open with US Stats and Earnings in Focus

It was a bearish start to the week for the DAX, which fell by 0.11% to end the day at 15,864. Significantly, the DAX struck a new 2023 high of 15,919.

Economic indicators from Germany delivered early support. However, US data and bets of May and June Fed interest rate hikes and a hawkish ECB forced a late pullback.

While economic indicators and inflation are focal points, corporate earnings will also influence. Deutsche Bank is among the big European names delivering results this week.

Ahead of a busy week on the US economic and earnings calendar, the NASDAQ Composite Index fell by 0.29%, while the Dow and S&P 500 saw gains of 0.20% and 0.09%, respectively.

Economic Indicators and Central Bank Chatter Delivered Mixed Results

German business sentiment figures drew interest on Monday morning. In April, the German Ifo Business Climate Index increased from 93.2 to 93.6, with manufacturers becoming more optimistic about the outlook.

The DAX responded to the stats, rising to a new 2023 high before hitting reverse.

US economic indicators weighed on riskier assets, with market sentiment toward Fed monetary policy also being bearish. The Dallas Fed Manufacturing Index fell from -15.7 to -23.4 in April, with the Chicago Fed Manufacturing Index holding steady at -0.19.

While the economic indicators were disappointing, investor sentiment toward Fed monetary policy turned more hawkish. According to the CME FedWatchTool, the probability of a 25-basis point May interest rate hike rose from 89.1% to 98.9% on Monday. Significantly, the chances of a June hike climbed from 23.4% to 24.7%.

ECB chatter added to the bearish mood. On Monday, ECB Executive Board member Isabel Schnabel said that a 50-basis point interest rate hike remains on the table.

The Market Movers

It was a mixed day for the auto sector. Mercedes-Benz Group and BMW led the way, rising by 0.98% and 0.56%, respectively. Volkswagen and Porsche saw more modest gains of 0.08% and 0.32%, respectively, while Continental fell by 0.37%.

It was also a mixed session for the banks. Commerzbank fell by 0.51%, while Deutsche Bank rose by 0.02%.

The Day Ahead for the DAX

It is a quiet day ahead on the economic calendar. There are no economic indicators from the euro area to influence. With no economic indicators to consider, investors should monitor ECB commentary. ECB Executive Board member Andrea Enria is on the calendar to speak today.

Looking ahead to the US session, it is a busier day on the US economic calendar. US consumer confidence figures for April will draw interest.

However, economists forecast the CB Consumer Confidence Index to slip from 104.2 to 104. A fall below 100 would move the dial. There is no Fed talk for investors to consider. The Fed entered the blackout period on Saturday.

US corporate earnings will also draw interest. Big names on today’s US earnings calendar include Microsoft (MSFT), Alphabet Inc. (GOOGL), Visa Inc. (V), McDonald’s Corp. (MCD), General Motors Co. (GM), and PepsiCo Inc. (PEP).

DAX Technical Indicators

Resistance & Support Levels

The DAX has to move through the 15,871 pivot to target the First Major Resistance Level (R1) at 15,912 and the Monday high of 15,919. A return to 15,900 would send a bullish signal. However, the DAX would need US economic indicators, corporate earnings, and central bank commentary to support a breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at 15,959 and resistance at 16,000. The Third Major Resistance Level (R3) sits at 16,047.

Failure to move through the pivot would leave the First Major Support Level (S1) at 15,824 in play. However, barring a flight to safety, the DAX should avoid sub-$15,800 and the Second Major Support Level (S2) at 15,783. The Third Major Support Level (S3) sits at 15,695.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 50-day EMA (15,683). 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 the Major Support Levels and the 50-day EMA (15,683) would support a breakout from R1 (15,912) to give the bulls a run at R2 (15,959) and 16,000. However, a risk-off event would deliver a fall through S1 (15,824) to bring S2 (15,783) into view. A fall through the 50-day (15,683) would signal a near-term bullish trend reversal.

The DAX Futures Sees Red

Looking at the futures markets, DAX was down 31 points, with the NASDAQ mini falling by 47.25. The Dow mini was down by 69.

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