DAX Set for a Choppy Session with Private Sector PMIs in Focus

Highlights

• It was a bearish Friday for the DAX, falling 0.17% to end the day at 16,177.
• There were no economic indicators from the euro area or the US to influence.
• However, it is a busy start to the week, with prelim private sector PMIs for July in focus.

It was a bearish end to a bullish week for the DAX, which fell by 0.17%. Partially reversing a 0.59% gain from Thursday, the DAX ended the week up 0.45% to 16,177. Significantly, the DAX avoided sub-16,000 for a fourth consecutive day.

There were no economic indicators from the euro area or the US to provide direction on Friday. The lack of economic indicators left corporate earnings to move the dial as investors consider the upcoming Fed and ECB monetary policy decisions.

SAP left the DAX in the red as investors responded to revisions to its full-year outlook for key cloud sales.

On Friday, bearish sentiment toward the tech sector weighed on the NASDAQ Composite Index, which fell by 0.22%. The Dow and S&P 500 ended the day with modest gains of 0.01% and 0.03%, respectively.

Economic Calendar Silent

There were no euro area or US economic indicators for investors to consider on Friday.

The Market Movers

It was another mixed session for the auto sector. Continental AG and Volkswagen saw gains of 0.72% and 0.69%, respectively. However, Mercedes-Benz Group fell by 0.50%, with BMW and Porsche ending the day down 0.09% and 0.07%, respectively.

It was also a mixed session for the banks. Commerzbank fell by 0.45%, while Deutsche Bank gained 0.77%.

However, SAP led the way down, sliding by 4.19%.

The Day Ahead for the DAX

It is a busy day ahead for the DAX. Prelim private sector PMIs for France, Germany, and the Eurozone will draw interest early in the European session.

Slower growth across the services sector and more marked contraction across the manufacturing sector would weigh on the DAX.

Economists forecast the German manufacturing PMI to increase from 40.6 to 41.0 and the services PMI to fall from 54.1 to 53.1. Forecasts for the Eurozone PMIs are also bearish. Economists forecast the Eurozone services PMI to fall from 52.0 to 51.5 and the manufacturing PMI to rise modestly from 43.4 to 43.5.

Later in the session, private sector PMIs from the US will also move the dial. We expect the services PMI to have more influence. With the markets betting on a soft landing, hotter-than-expected services PMI and sub-components could reignite bets on a post-summer Fed rate hike.

Economists forecast the US services PMI to fall from 54.4 to 54.0.

However, beyond the economic calendar, corporate earnings will also need consideration.

DAX Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The DAX sat above the 50-day (16,029) and 200-day (15,885) EMAs, signaling bullish momentum over the near and longer term.

Significantly, the 50-day EMA pulled further away from the 200-day EMA, sending bullish signals and supporting a run at the 16,310 – 16,360 resistance band.

A DAX move through the July high of 16,241 would bring the 16,310 – 16,360 resistance band into play. However, the private sector PMIs and corporate earnings must be DAX-friendly to support a bullish session.

A fall through the upper level of the 16,080 – 16,000 support band would bring the 50-day EMA (16,029) and sub-16,000 into view.

The 14-4H RSI sits at 61.17, sending bullish signals. Significantly, the RSI aligns with the EMAs, supporting a breakout from the July high (16,241) to target the 16,310 – 16,360 resistance band.

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