Dax index started the week on positive foot amid optimism on the reopening of businesses as coronavirus death rate continues to fall. Robert Koch Institute reported earlier today 169,575 confirmed coronavirus cases with a total of 7,417 deaths. Investors should be cautious as in Germany, the reproduction rate jumped over the weekend to 1.1 after lockdown eased.
Weak economic data ignored by investors as shift their attention to the recovery of the economy as more and more businesses reopen. Ifo institute reported that 39% of German companies in the car industry decided to cut jobs in April, while 50% of companies in hotels, 58% in restaurants business, 43% in travel agencies also decided to cut jobs last month. The Ifo institute estimates that the German economy will contract by 1.9% in Q1 12.2% in Q2 and 6.6% in 2020. The institute expects the German economy to return to pre-coronavirus levels by the end of next year. Last week, the Germany Manufacturing PMI came down to 34.5, but above the expectations of 34.4 in April, the previous reading was at 34.4.
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Dax Index Technical Analysis
Dax index is 0.48% higher at 10,954, trading at weekly highs, recovering almost all of previous week losses. Dax outlook is bullish for the short term after it breached the 50-day moving average on May 5. The longer-term picture remains bearish, and only a break above the 100-day moving average can cancel it.
Looking north, the first resistance for the Dax index stands at 10,986 the daily top. A move above 10.986 would target the April 30 high at 11,252. A break higher might challenge 11,436 the low from March 6, which will also close the gap down, that initiated the sharp sell-off.
On the flip side, initial support for Dax index stands at 10,925 the daily low. In case the selling pressure continues, the next support is at 10,589 the low from May 7 trading session. Below 10,589 the next support will be met at 10,338 the 50-day moving average.
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