Sentiment Dwindles on GER 40 Losses

Piece written by Alexa Smith, Trive Financial Market Analyst 

The GER 40 Futures (EUREX: FDAX) edged lower in reflection of the ongoing challenges facing the manufacturing sector in Europe. The PMI data released on Monday revealed a continued downturn in the manufacturing sector, revealing a further slip into contraction from 43.5 to 43.4. The HCOB Services PMI increased from 47.9 to 48.7 but remains in a contractionary phase.  

Retail Sales in Europe also slipped more than expected, reporting a percentage change of -2.1% for August from -1% in July. Inflation data from last week showed that Euro Zone inflation had dropped to its lowest level since October 2021, plummeting to 4.3% in September. Moderating inflation boosted sentiment as the equity market assessed the likelihood of the European Central Bank’s monetary policy tightening ending. However, the upward momentum was short-lived as the macroeconomic condition of the economy was assessed. Will the GER 40 endure more downside risk?  

Technical 

The GER 40 Futures traded within a range on the 4H Chart, but a slip due to poor macroeconomic conditions brought the Futures within reach of the 15076 support. Soothing inflation boosted the index futures to establish a swing high at the 15648 level, but sentiment lacked motivation, falling short of the 50-day moving average line.  

Since the 50-day moving average line has diverged from the 100-day moving average line, the index futures may look to retest the 14721 support. However, a surge in buying volume could pave the way for a retracement towards the 15648 resistance. Here, the index futures may set their sights on the 50-day moving average line in order to reaffirm an uptrend. 

Summary 

A downtrend seems to be in full swing on the 4H Chart, with the rejection of the 15648 resistance paving the way for a deeper pullback towards the 15076 support. If downside momentum ensues, the index futures could attempt to retest the 14721 support. However, a surge in buying volume could prompt a slight pullback towards the 15648 resistance.  

Sources: TradingView, CNBC, Reuters