DAX Set for a Bullish Open Ahead of a GDP and Inflation Numbers

It was a choppy Thursday session for the DAX, which recovered from an early sell-off to end the day up 0.03% to 15,801. Significantly, the DAX came up short of the 15,900 handle for the third consecutive session.

Euro area economic indicators had a limited impact on the DAX, with corporate earnings in the spotlight. The banking sector delivered support, with Deutsche Bank and Barclays beating profit expectations.

However, weaker-than-expected economic growth numbers from the US left the DAX flat for the session. The DAX trailed the US markets, with earnings from Amazon.com (AMZN) coming after the closing bell.

On Thursday, the NASDAQ Composite Index jumped by 2.43%, with the Dow Jones and S&P 500 seeing gains of 1.57% and 1.96%, respectively.

Meta Platforms (META) earnings results from Wednesday fueled the breakout session, with Amazon.com beating estimates after the closing bell. First Republic Bank (FRC) also had a breather, rising by 8.79% on Thursday,

US Economic Indicators Overshadow Earnings

On Thursday, euro area consumer confidence failed to deliver DAX support.

Italian business and consumer confidence figures gave mixed signals, with Eurozone economic sentiment waning.

In April, Italy’s consumer confidence index rose from 105.1 to 105.5, while the business confidence index fell from 104.1 to 103.0. Economists forecast the business confidence index to slip to 104.0 and the consumer confidence index to rise to 105.5.

However, US economic indicators delivered another pullback. The US economy expanded by 1.1% in Q1 versus 2.6% in Q4. Economists forecast growth of 2.0%. However, US jobless claims avoided another weekly increase, falling from 246k to 230k.

Significantly, housing sector data sounded the alarm bells, with pending home sales tumbling by 5.2% in March versus a forecasted 0.5% increase.

The US GDP numbers had no impact on sentiment toward Fed monetary policy. According to the CME FedWatch Tool, the probability of a 25-basis point May interest rate hike rose from 72.2% to 87.7% over 24 hours and from 84.5% one week earlier.

The Market Movers

It was another mixed day for the auto sector. BMW and Continental saw losses of 0.36% and 1.06%, respectively.

However, Porsche and Volkswagen saw modest gains of 0.06% and 0.64%, respectively, while Mercedes-Benz Group ended the day flat.

It was a bullish session for the banks. Commerzbank rose by 1.50%, with Deutsche Bank ending the day up 2.47%.

The Day Ahead for the DAX

It is a busy day ahead on the euro area economic calendar.

French, German, Italian, and Eurozone GDP numbers for Q1 will draw interest ahead of prelim German inflation figures for April.

We expect the stats to influence, with a pickup in economic activity across the euro area and sticky German inflation likely to support a 50-basis point ECB interest rate hike in May.

With investors focused on inflation and central banks, ECB member chatter will move the dial. ECB President Christine Lagarde is on the calendar to speak today.

Looking ahead to the US session, it is a busier day on the US economic calendar. US core PCE Price Index, personal income and spending, and consumer sentiment figures will influence.

An unexpected pickup in inflationary pressure and personal spending would support a more hawkish Fed.

Away from the economic calendar, US corporate earnings will also influence market risk sentiment. Big names on the US earnings calendar include Exxon Mobile (XOM) and Chevron (CVX).

DAX Technical Indicators

Resistance & Support Levels

The DAX has to avoid the 15,789 pivot to target the First Major Resistance Level (R1) at 15,871. A move through the Thursday high of 15,859 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 15,941. The Third Major Resistance Level (R3) sits at 16,093.

A fall through the pivot would bring the First Major Support Level (S1) at 15,719 into play. However, barring a flight to safety, the DAX should avoid the Second Major Support Level (S2) at 15,637. The Third Major Support Level (S3) sits at 15,485.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 50-day EMA (15,720). 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 50-day EMA (15,720) and S1 (15,719) would support a breakout from R1 (15,871) to give the bulls a run at R2 (15,941) and 16,000. However, a risk-off event would deliver a fall through the 50-day EMA (15,720) and S1 (15,719) to bring S2 (15,637) into view. A fall through the 50-day (15,720) would send a bearish signal.

The DAX Futures Sees Red

Looking at the futures markets, DAX was up 62 points, while the NASDAQ mini was down by 24.25. The Dow mini fell by 41.

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