DAX Set for Another Testy Session with the US Jobs Report in Focus

Highlights

• It was another bearish day for the DAX on Thursday, falling 0.79% to wrap up the day at 15,893.
• Service sector PMI numbers weighed, with the US downgrade to AA+ continuing to resonate.
• The European and US economic calendars will draw interest today. Factory orders from Germany and the US Jobs Report will be in focus.

It was a bearish Thursday for the DAX, which fell by 0.72%. Following a 1.36% fall on Wednesday, the DAX ended the day at 15,893. Significantly, the DAX ended the day at sub-16,000 for the first time since July 11.

Economic indicators from the euro area continued to weigh on investor sentiment. After the disappointing manufacturing PMI numbers, service sector PMIs added to the bearish mood. Trade data from Germany was also bearish despite a widening trade surplus.

Later in the European session, US service sector activity slowed, raising more red flags.

The NASDAQ Composite Index slipped by 0.10%, with the Dow and the S&P 500 seeing losses of 0.19% and 0.25%, respectively. After the US closing bell, Amazon.com (AMZN) and Apple (AAPL) beat earnings forecasts.

Economic Indicators Sent Bearish Signals

It was a busy day on the European economic calendar, with German trade data and euro area services PMIs in focus. The numbers disappointed, with services PMIs taking a dip in July.

Going into the European session, trade data from Germany disappointed. While the trade surplus widened from 14.4 billion to €18.7 billion, a slide in imports and a modest rise in exports reflected the weak demand environment.

Service sector PMI numbers from the euro area added to the bearish sentiment. The German Services PMI fell from 54.1 to 52.3 in July, with the Eurozone Services PMI down from 52.0 to 50.9.

The numbers from the US also weighed, with the all-important ISM Non-Manufacturing PMI falling from 53.9 to 52.7 in July versus a forecasted 53.0. The sub-components drew interest. A fall in employment and an upswing in the price sub-components sent bearish signals. Significantly, the ISM Non-Manufacturing Prices sub-Index rose from 54.1 to 56.8.

The Market Movers

It was another mixed session for the auto sector. Both BMW and Continental AG saw losses of 2.17%. Porsche and Volkswagen fell by 0.76% and 0.18%, respectively, while Mercedes-Benz Group bucked the trend, rising by 0.15%.

However, it was a bullish session for the banks. Commerzbank and Deutsche Bank ended the day up 2.86% and 2.09%, respectively.

The Day Ahead for the DAX

This morning, German factory orders will set the tone. After dire manufacturing sector PMI numbers, a slide in factory orders would raise the bets on a euro area economic recession. Economists forecast factory orders to fall by 1.5% in June.

Eurozone retail sales figures will also draw interest in the early part of the European session. However, the US Jobs Report will have the final say. Economists are betting on a soft landing and the Federal Reserve ending its monetary policy tightening cycle. The Jobs Report will test the theory.

A pickup in wage growth and a steady unemployment rate of 3.6% could put the Fed hawks back in the driving seat.

DAX Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The DAX sat below the 50-day (16,140) and 200-day (15,963) EMAs, sending bearish near and longer-term price signals.

Significantly, the 50-day EMA narrowed to the 200-day EMA, sending bearish price signals and supporting a DAX return to sub-15,750 to bring the 15,600 – 15,525 support band into play.

However, a DAX move through the 200-day EMA (15,963) and the lower level of the 16,000 – 16,080 resistance band would give the bulls a run at the 50-day EMA (16,140).

The 14-4H RSI sits at 31.46, signaling bearish sentiment, with selling pressure overweighing buying pressure. Significantly, the RSI aligns with the EMAs, supporting a return to sub-15,750 to bring the 15,600 – 15,525 support band into play.

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