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European Equities Technical Outlook: DAX 30, IBEX 35

European Equities Technical Outlook: DAX 30, IBEX 35

Daniela Sabin Hathorn, Analyst

Talking Points:

  • Equities attempt to gather bullish momentum despite growing inflation concerns
  • Key levels to watch out for in the DAX 30 and IBEX 35

Despite the ongoing concerns about inflation, equities are determined to end the week on a positive note. Yesterday’s US PPI data showed an impressive 6.2% jump in factory gate prices in the month of April, which followed on from stronger than expected CPI data the day before. As investors turn their focus to this afternoon’s retail sales data to gauge how consumers have been coping, US and European equities are taking a breather after a few days of intense selling.

DAX 30 Levels

The DAX 30 has been one of the most hard-hit in Europe during this week’s tech stock selloff, dropping over 4% during the first 4 days of the week. The German index was already facing strong overbought conditions before this week, having faced several rejections at its previous all-time high. The ascending trendline was able to offer support throughout the first stage of the pullback, but increase selling momentum saw the index drop below the trendline in yesterday’s session, falling under the psychological 15,000 mark.

Selling pressure seems to have eased for now, and it is not unusual that we see a reversal before any further pullback is achieved. The 4-hour chart is showing overbought conditions again after the DAX 30 rebounded 1.8% on Thursday afternoon, which would justify sellers regaining control. It is also important to note that the bullish reversal was halted at 15,320, which falls within the area where the German index has previously found tough resistance leading to sideways consolidation. Therefore, unless it is able to break 15,350 in the next few sessions, the DAX 30 is likely to be facing further selling pressure going into next week.

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DAX 30 4-hour chart

European Equities Technical Outlook: DAX 30, IBEX 35

IBEX 35 Levels

The IBEX 35 has been able to control the pullback slightly better, but then again the Spanish index hadn’t gotten as far ahead of itself as other world indices. It has been keeping a consistent upward trend since the end of April when it managed to break away from its 6-week range, but the IBEX has faced rejection just after passing the 76.4% Fibonacci at 9,075. Keep in mind that the Spanish index has been struggling to overcome its Fibonacci levels along the way, so the fact that it was able to break above this Fibonacci level with little resistance speaks to its improving technical outlook.

This week’s pullback has been following wider market trends and is expected after a strong period of growth, so I would be looking out for the 9,075 as a key area of continued bullish momentum. If able to break above, then overcoming Monday’s high at 9,151 will likely see increased buying pressure as investors attempt to close the Covid-19 gap. To the downside, if bearish momentum mounts, then 8,800 is likely to act as immediate support, followed by 8,735.

IBEX 35 4-hour Chart

European Equities Technical Outlook: DAX 30, IBEX 35

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--- Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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