DAX Index Plunge On Escalating US-China Tensions

dax index

Dax index slumps on early trading amid escalating tensions between the U.S. and China, after U.S. Secretary Mike Pompeo said that there is enormous evidence that the COVID-19 originated in a research laboratory in Wuhan, China. President Trump warned that the U.S. might impose new tariffs to China on the premise that coronavirus was spread on purpose or didn’t handle the outbreak properly to protect the rest of the world.

On the economic data, the Germany Manufacturing PMI came in at 34.5, the lowest since 2009, topping the expectations of 34.4 in April, the March reading was at 34.4. Exports sales drop faster than overall new orders, reflecting particularly weak demand from Italy, Spain, France, and the U.S.

Phil Smith, Economist at IHS Markit, said: The fall in manufacturing production now pales in comparison to the unprecedented fall seen in April following a month of virus containment measures at home and abroad. The Output nosedived as large numbers of manufacturers either temporarily shut down factories or cut working hours amid a sharp drop in export demand across Europe and the U.S., and mounting supply chain challenges. Job cuts continue to gather pace despite the widespread uptake of the short-time working scheme, increasing the chances of a more protracted recovery.

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Dax Index Support and Resistance

Dax index is 2.80% lower at 11,557, as the index retreat from eight-week highs amid the escalation in trade tensions between China and U.S.A. The index started with a gap down and breached below the 50-day moving average support line. Dax spent only two days above the 50-day moving average the previous week; Dax managed to return above the 50-day moving average last week for the first time after February 21. Today’s sharp correction cancels the recent positive momentum, and lower levels might be on the cards. 

On the downside, initial support for Dax index stands at 10,498 the daily low. In case the bears persist, the next support is at 10,294 the low from April 24 trading session. Below 10,294 the next support will be met at 9,827 the low from April 6. 

On the flip side, the first resistance for the Dax index stands at 10,578 the daily high. A move above 10.578 would target Friday’s high at 11,252. A break higher might challenge 11,768 the high from March 6.  

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