The German DAX index recovered from losses early in the week that saw the index trade at lows around 11,700 and the 13,000 level is now being tested once more.
The DAX index was lower with other European stocks last week as Coronavirus cases continued to build in the Eurozone, seeing localised lockdowns and the return of stricter rules around air travel between countries. The region is seeing a resurgence in virus cases, which may get worse as we approach the cooler winter climate, although death rates continue to fall.
Adding to the gloomy picture was economic data that suggested the European economy will take longer to recover than expected. The IHS Markit Purchasing manager’ Index fell from 54.9 last month to 51.6, with the 50 level being the difference between growth and contraction in the economy.
Tomorrow may bring further clarity with the release of final German GDP numbers for Q2 and the IFO business climate survey. The survey rose to a post-pandemic high of 90.5 in July, after slipping to a record low of 74.2 in April. A figure of 92 is expected for tomorrow, however, last week’s Markit release may suggest the survey could underperform market expectations.
The Dax was 1.64% higher on Monday and is looking to move through the 13,000 level, with some resistance at the 13,250 price being the only obstacle to a run for the February highs at 13,800.
The very short-term trend in the DAX 30 will remain upwards as long as the price trades above Friday’s low of 12621. Traders that are not long will probably wait for a corrective decline of the latest bull leg to the 50% Fibonacci level at 12885 before turning bullish.