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DAX 40 Latest: Bouncing Higher, Brushes off Manufacturing Slump

DAX 40 Latest: Bouncing Higher, Brushes off Manufacturing Slump

Zain Vawda, Analyst
  • German Manufacturing PMI 49.2 vs 50.6 Forecast
  • EZ Manufacturing PMI Flash 49.6 vs 51 Forecast
  • Germany Has Agreed an €8bn Bailout Package for Uniper.

Quantitative Tightening: What is it and How Does it Work?

DAX 40: Bounces Higher, Brushes off Manufacturing Slump

The Dax edged higher in European Trade, ending the week on a positive note despite the European Central Bank’s larger-than-expected interest rate hike as well as disappointing survey growth data. The European Central Banks (ECB) raised interest rates by 50 basis points to zero percent on Thursday, its first hike in 11 years, ending a policy of negative interest rates that had been in place since 2014. The hike was more than the 25 basis points increase that ECB President Christine Lagarde guided towards at the central bank’s June meeting, suggesting that the policymakers have become very concerned about inflation, with Eurozone CPI now at a record annual 8.6%, even at the expense of growth in the region.

The latest PMI survey data for the Eurozone suggested that growth is slowing in the region, even before the central bank has started to tighten monetary policy.The key German manufacturing PMI release fell to 49.2 in July, dropping into contraction territory and its lowest level in 25 months, reinforcing predictions that Europe’s biggest economy is heading into a recession in the second half of 2022.For the ECB, today’s PMI could confirm the view of a modest set of rate hikes. After yesterday’s 50 basis points, the ECB may only hike a further 50 basis points in total as recessionary pressures are already cooling the economy quite significantly.

Meanwhile, Germany has agreed an €8bn bailout package for Uniper, with the government planning to take a 30 per cent stake in the energy company that came close to collapse after Russia slashed gas supplies to the country.Olaf Scholz, Chancellor, who broke off his holiday in Southern Germany to complete the deal, said Uniper was of “paramount importance” to the economy and for energy supplies to companies and residential customers.

DAX 40 Daily Chart - July 21, 2022

Source: TradingView

DAX 40 2H Chart - July 21, 2022

Source: TradingView

From a technical perspective, yesterday saw a push down close to our key psychological 13000 level before bouncing and closing marginally up for the day. The daily candle close is indicative of an inverted hammer as we have seen price follow through to the upside in European trade. On an intraday view, we currently trade above the 20, 50 and 100-SMA with a break and close of a 2H candle above Wednesday’s highs (13440) may see intraday follow through to the resistance area around 13778.

Key intraday levels that are worth watching:

Support Areas

  • 13090
  • 12940
  • 12720

Resistance Areas

  • 13778
  • 14000
  • 14470
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Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda

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

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