DAX 40 Edges Higher Unfazed by Poor Economic Sentiment

• Lackluster ZEW economic sentiment fails to curb upside rally.
• Energy fallout hits new sectors adding further pressure on governments.
• Leaked paper reveals EU is unlikely to cap the price of Russian gas - Guardian.

DAX 40: Edges Higher Unfazed by Poor Economic Sentiment

The DAX continued its move higher in European trade with gains of 100-odd points from session lows. Market sentiment remains upbeat as we edge closer to the US CPI print later in the day. We had German inflation numbers as well as Eurozone and German ZEW Economic Sentiment numbers released with neither having much effect on the index.

German CPI numbers climbed once more from 7.5% to 7.9% annually in August, the highest level since the 1990’s reunification. We saw increases in food and services while energy prices remain elevated. Energy products saw a sharp increase with heating oil up (111.5%), natural gas (83.3%), electricity (16.6%) and motor fuels (16.5%) respectively. At the same time we saw Euro and German investor confidence sink to new lows which should add some uncertainty for the ECB rhetoric moving forward.

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On the energy front, we are seeing ripple effects as soaring energy prices hit sectors well beyond utilities and energy-intensive industries. The effects are being felt in the UK, Belgium and Germany as companies grapple with rising costs. The German Finance Ministry announced yesterday that it would like to boost state loans for energy companies through credit authorizations already created during the pandemic for a relief fund. According to the Handelsblatt business daily, Government sources indicated that EUR67 billion in credit is expected to be transferred from the WSF economic stabilization fund to state development bank KFW. Last week’s meeting of energy ministers regarding caps on Russian oil will result in a stalemate, this according to leaked documents seen by the Guardian.

On the corporate Bayer AG (BAYGn) has apparently started its search for a new CEO, this according to people familiar with the matter. Current CEO Werner Baumann has been the subject of shareholder frustrations on numerous occasions since his appointment in 2016. Shares in Bayer AG were up 2.1% for the session.

DAX 40 Daily Chart –September 13, 2022

Source: TradingView

From a technical perspective, we had a Bullish engulfing candle close last Friday which closed above the 13000 key psychological level. The weekly candle closed without any upside wick indicating strong momentum for buyers and a strong chance of upside this week.

On the daily timeframe we have seen a continued push higher following yesterday bullish marubozu candle close. We have broken above the 20,50-SMA and trade just above the 100-SMA with the trendline just above. Price action shows that we failed to take out previous lows on the daily and have now printed a higher low, with a higher high needed to confirm the change of structure. As much as technical can tell us any further upside move will be dependent on US CPI data out shortly A downside miss could see the index rally higher as the risk-on mood may persist.

Key intraday levels that are worth watching:

Support Areas

•13340

•13275

•13110

Resistance Areas

•13570

•13771

•13900

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Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda