DAX Set for a Bullish Open with the US Jobs Report in the Spotlight

It was a bearish Thursday session, with the DAX falling by 0.51% to end the day at 15,734. The bearish session led the DAX to sub-15,700 for the first time in three sessions.

Disappointing private sector PMI numbers for Eurozone member states and the Eurozone weighed on investor sentiment. A hawkish ECB added to the bearish mood.

However, disappointing US economic indicators provided modest support. Weak labor market economic indicators wiped out bets on a June Fed interest rate, with bets on an H2 2023 interest rate cut delivering support.

The US banking sector crisis and the debt ceiling remained headwinds.

On Wednesday, the NASDAQ Composite Index fell by 0.46%, with the Dow Jones and S&P 500 seeing losses of 0.80% and 0.70%, respectively.

Economic Indicators and the ECB Leave the DAX in the Red

It was a busy Thursday on the European economic calendar. German trade data failed to move the dial despite the trade surplus widening from €16.0 billion to €16.7 billion in March versus a forecasted €16.1 billion.

Private sector PMIs came in weaker than expected, with investor caution ahead of the ECB monetary policy decision and press conference weighing on buyer appetite.

For the Euro area, the Services PMI increased from 55.0 to 56.2, down from a prelim 56.6. As a result, the Composite PMI rose from 53.7 to 54.1, down from a prelim 54.4.

While the euro area numbers weighed on investor sentiment, US economic indicators removed bets on a June Fed interest rate hike.

Initial jobless claims increased from 229k to 242k, with nonfarm productivity sliding by 2.7% in Q1. However, unit labor costs surged by 6.3%. Economists forecast nonfarm productivity to fall by 1.8% and unit labor costs to increase by 5.5%.

According to the CME FedWatch Tool, the probability of a 25-basis point June interest rate hike fell from 16.3% to 0% over 24 hours. In contrast, the bets on a 25-basis point interest rate cut increased from 6.6% to 9.2%.

While the ECB and the economic indicators drew interest, the ongoing US banking crisis continued to pressure bank stocks.

The Market Movers

It was a mixed day for the auto sector. BMW led the way, jumping by 2.75%, with Porsche and Volkswagen seeing gains of 0.24% and 0.60%, respectively. Mercedes-Benz Group rose by 0.02%, while Continental bucked the trend, sliding by 2.66%. A sharp increase in BMW’s car segment earnings margin in Q1 2023 delivered support.

It was another bearish session for the banks. Commerzbank and Deutsche Bank saw losses of 3.47% and 3.32%, respectively.

The Day Ahead for the DAX

This morning, German factory orders will draw interest before French industrial production, German construction PMI, and euro area retail sales figures.

We expect the German factory orders and euro area retail sales figures to garner the most interest. Weak numbers would test the appetite for riskier assets.

Looking ahead to the US session, it is a busy day on the US economic calendar. The US Jobs Report will be the main report of the day.

A pickup in wage growth and a jump in nonfarm payrolls would refuel bets on a June interest rate hike.

Beyond the economic calendar, the banking sector, the US debt ceiling, and corporate earnings need consideration. Adidas will release its earnings results today.

DAX Technical Indicators

Resistance & Support Levels

The DAX has to avoid the 15,731 pivot to target the First Major Resistance Level (R1) at 15,800. A move through the Thursday high of 15,797 would send a bullish signal. However, the DAX would need the US Jobs Report and banking sector-related news to support a breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at 15,866. The Third Major Resistance Level (R3) sits at 16,001.

A fall through the pivot would bring the First Major Support Level (S1) at 15,665 into play. However, barring a US Jobs Report-fueled sell-off, the DAX should avoid sub-15,600 and the Second Major Support Level (S2) at 15,596. The Third Major Support Level (S3) sits at 15,461.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 100-day EMA (15,622). 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 move through the 50-day EMA (15,745) would support a breakout from R1 (15,800) to give the bulls a run at R2 (15,866). However, a US Jobs Report-fueled sell-off would deliver a fall through the 50-day EMA (15,745) to bring S1 (15,665) into view. A fall through the 50-day (15,745) would send a bearish signal.

The Futures Sees Green

Looking at the futures markets, DAX was up 63 points, with the NASDAQ mini gaining 62.5. The Dow was up 79.

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