This morning at 8:25 am London time, the DAX index reached a new 2019 high of 12916, however, just five minutes later at 8:30, the German Markit Manufacturing PMI gave investors a reason to sell.
The leading economic indicator rose to 41.9 from 41.7, but that was less than the 42 projected by the markets. A reading below 50 suggests that the manufacturing sector is contracting.
The German services sector PMI also failed to impress and declined to 51.2 from 51.4, and lower than the 52 projected.
The technical outlook remains unchanged for now, and the possible bullish scenario that I reported on yesterday remains in play. However, instead of treating the break to last week’s high of 12824 as the initiation of a rectangle pattern, I am treating the price action as a descending triangle. However, the price target remains the same at 13048.6.
In the short-term, the DAX index might decline to the 126516 to 12834 interval, but as the trend is bullish above yesterday’s low of 12651.6, I suspect trades will buy a dip in the DAX 30.
Effectively, traders appear to be ignoring the bad data from Germany and instead focus on how ECB’s QE and Fed’s rate cuts might boost economic activity in 2020 when it anticipated that the economy will be in a better state than today.
Later today, the ECB rate meeting is sure to stir up market volatility, but none of the six banks we surveyed think that the ECB meeting will deliver any surprises. Read this article to know more about their expectations: ECB Preview: What Do Six Banks Anticipate?