The DAX index is struggling to find direction in the futures market as traders react to the rising risks in the market. The index is trading at €11,592, which is slightly higher than Friday’s low of €11,325.
The blue-chip German index is reacting to several factors today. First, and most notably, the number of Covid-19 cases in Germany is rising. Yesterday, the country confirmed more than 14,000 new cases, slightly below the previous day’s high of 19,000. These numbers brought the total number of infections to more than 552k.
Sadly, Germany is not alone. Other European countries like Portugal, Spain, Belgium, and France have reported rising cases. For example, in France, the government confirmed more than 45k cases yesterday, bringing the total to more than 1.40 million.
As a result, several leaders in Europe are pondering about fresh lockdowns to halt the spread. The UK became the first country to declare the first national lockdown yesterday.
In Germany, Angela Merkel’s government has also initiated a partial lockdown that will see hotels, bars and restaurants closed. Most business activity, including schools and shops will continue working.
Restrictions in Germany and other European countries will not help companies in the DAX index. This is because it will affect demand for their goods and services and raise the cost of doing business.
Meanwhile, the DAX is also wavering because of the risks associated with the upcoming general election in the United States. While investors have already priced-in a Biden victory, they are aware that polls have been wrong before. A Biden victory will mostly be a good thing for companies in the DAX index because it will reduce the ongoing tensions between the US and Germany.
DAX Index technical outlook
On the four-hour chart, we see that the DAX index is in a consolidation phase after falling by more than 15% since September 3rd. The index is below the 15-day and 25-day exponential moving averages. The price has also formed a bearish consolidation pattern that is shown in black.
Therefore, the index will likely remain in the current consolidation phase today and possibly continue falling this week. If it does, the next level to watch will be last week’s low of €11,325. On the flip side, a move above the resistance level of €11,705 will invalidate this level.
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DAX technical chart
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