Piece written by Alexa Smith, Trive Financial Market Analyst 

The GER 40 Futures (EUREX: FDAX) have been plagued by woes from the manufacturing sector, a lacklustre boost from China’s reopening, and the weight of elevated energy costs. Germany slipped into a technical recession in the first quarter of this year as GDP growth shifted from 0% to -0.3% and has been unable to show positive growth since.  

While short-term resurgences in the GER 40 could coincide with a broader uptick in China-related assets, there remains a palpable risk that the anticipated economic impetus from Chinese trade may not manifest as robustly as expected. Looking further into the future, the note of caution is evident, with potential escalations in geopolitical tensions or disruptions in global trade acting as potential impediments to Germany’s path to recovery. 

Moreover, headline inflation in the Euro Area was released yesterday and exhibited a modest decline of 0.1%, supporting the need for interest rates to be kept higher for longer in an effort to bring inflation down to the 2% target and further capping the equity market’s gains. 

Technical 

The GER 40 Futures gapped up, falling short of the Golden Ratio before tumbling for support at the 50-day moving average line. The Futures have struggled to garner upward momentum, with an ascending channel failing to boost sentiment. However, the 50-day moving average held and bolstered the price action towards the 15920 resistance at the 38.20% Fibonacci Retracement, which could pave the way towards the 50% level if a breakout occurs.  

However, the 15920 resistance could hold and encourage a pullback towards the 15813 support at the 50-day moving average. If the price action crosses over the moving average lines, the 15598 support could mark a pivot point for a downtrend towards the 15598 support.  

Summary 

The GER 40 Futures could not sustain an uptrend due to waning optimism in the German economy. Since the price action sits at the 15920 resistance level, a breakout may occur towards the 50% level. However, the 15920 resistance could hold and spur the Futures to retest the 15813 support at the 50-day moving average line. 

Sources: TradingView, CNBC