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DAX Set for a Bullish Monday on US Debt Ceiling News

By:
Bob Mason
Updated: May 29, 2023, 06:18 UTC

It is a quiet Monday session for the DAX, with no economic indicators for investors to consider. However, news from Washington will move the dial.

DAX Tech and Fundamental Analysis - FX Empire

It was a breakout day for the DAX. The DAX rallied 1.20%. Reversing a 0.30% loss from Thursday, the DAX ended the week up 1.20% to 15,984. Despite the bullish session, the DAX ended the day at sub-16,000 for the third consecutive session.

There were no euro area economic indicators for investors to consider on Friday. The lack of stats left US debt ceiling-related news and US economic indicators to provide direction.

A pickup in US inflationary pressure failed to send the DAX into the red, with upbeat personal spending and core durable goods orders signaling a pickup in US economic activity.

While bets on a 25-basis point Fed interest rate hike in June spiked, progress toward avoiding a US default supported a breakout afternoon session.

The NASDAQ Composite Index responded to the news from Washington, rallying 2.19%, with the Dow and S&P 500 seeing gains of 1.00% and 1.30%, respectively.

US Economic Indicators Fuel Bets on a Fed Hike

There were euro area no economic indicators to influence the Friday session. However, it was a busy US session.

A pickup in US inflationary pressure failed to spook investors, with US economic indicators showing the US economy picking up momentum.

The Core PCE Price Index increased by 4.7% year-over-year versus 4.6% in March. However, core durable goods orders rose by 0.4% in April versus a forecasted 0.3% increase, with personal spending surging by 0.8% versus an expected 0.4% rise.

Michigan Consumer Sentiment figures also beat expectations, with the Index falling from 63.5 to 59.2. Economists forecast the Index to decline to 57.9.

The pickup in inflation and the better-than-expected personal spending and consumer sentiment figures fueled expectations of a 25-basis point June interest rate hike.

According to the CME FedWatch Tool, the probability of a June hike increased from 51.7% to 64.2% on Friday.

The Market Movers

It was a bullish day for the auto sector. Continental surged by 4.27%, with Mercedes-Benz Group and BMW seeing gains of 1.69% and 1.63%, respectively. Volkswagen and Porsche also found support, rising by 1.37% and 1.00%, respectively.

However, it was a mixed session for the banks. Commerzbank slipped by 0.08%, while Deutsche Bank ended the day with a 0.42% gain.

The Day Ahead for the DAX

It is a quiet day on the European economic calendar, with no euro area economic indicators to provide direction.

There are also no US economic indicators to influence the afternoon, leaving central bank chatter and news from Washington to provide direction.

News from the weekend of US President Joe Biden and Speaker of the House Kevin McCarthy reaching a debt ceiling deal should deliver support.

DAX Technical Indicators

Resistance & Support Levels

R1 16,086 S1 15,804
R2 16,189 S2 15,625
R3 16,471 S3 15,343

The DAX has to avoid the 15,907 pivot to target the First Major Resistance Level (R1) at 16,086. A move through the Friday high of 16,009 would send a bullish signal. However, the DAX would need central bank chatter and debt ceiling news support a breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at 16,189. The Third Major Resistance Level (R3) sits at 16,471.

A fall through the pivot would bring the First Major Support Level (S1) at 15,804 into play. However, barring another risk-off-fueled sell-off, the DAX should avoid sub-15,750 and the Second Major Support Level (S2) at 15,625. The Third Major Support Level (S3) sits at 15,343.

DAX resistance levels in play above the pivot.
DAX 290523 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The DAX sat above the 50-day EMA (15,955). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA (15,955) would support a breakout from R1 (16,086) to target R2 (16,189). However, a fall through the 50-day EMA (15,955) would bring the 100-day EMA (15,848) and S1 (15,804) into view. A fall through the 50-day EMA would send a bearish signal.

EMAs are bullish.
DAX 290523 4 Hourly Chart

The DAX Futures Sees Green

Looking at the futures markets, DAX was up 24 points, with the NASDAQ and Dow up 72 and 76 points, respectively.

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

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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