Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
European equities commenced the final quarter of 2023 with modest gains, with the GER 40 Futures (EUREX: FDAX) trading at 15,569. Investor sentiment improved as the U.S. Congress passed a stopgap funding bill, averting a government shutdown. Attention also turned to factory activity data, particularly the HCOB Manufacturing PMI for Germany, a critical component of the Eurozone economy.
The actual HCOB Germany Manufacturing PMI for September came in slightly below expectations at 39.6, reflecting the fifteenth consecutive month of contraction in the manufacturing sector. Factors contributing to this contraction include declining output, weak demand, reduced backlogs of work, and a decrease in employment. Additionally, goods producers’ expectations for future output deteriorated to the lowest since November of the previous year.
While U.S. futures climbed on the news of the funding bill, Ger40-Futures saw a modest rise as well, gaining about 0.3%. Traders are closely monitoring this manufacturing data and the broader economic and inflationary outlook, which could be impacted by prolonged elevated interest rates.
Technical Analysis
The GER 40 Futures currently trade at 15,569, showing signs of short-term bullish momentum. The price action is comfortably above the daily pivot point and the upward-sloping 20-EMA (green line) but below the 50-EMA (blue line) and the 100-EMA (red line). The 100-EMA is trading above both the 20-EMA and the 50-EMA, although the 20-EMA recently crossed below the 50-MA and the 100-EMA.
The Relative Strength Index (RSI) has sustained an upward push, with a reading of 52.39 and a rising RSI-based Moving Average at 39.45, indicating growing buying momentum.
Short-term trading opportunities may arise if the price action can maintain their push higher. In such a scenario, the resistance around the 15,646 price level could be targeted, with potential breaks leading to further resistance levels at 15,737 and 15,966.
Conversely, a failure to sustain upward momentum might provide short-term trading opportunities toward the initial support at 15,456. A breakdown below this level could lead to further support tests at 15,262 and 15,154.
Summary
Incorporating the fundamentals and technical analysis, the GER 40 Futures are currently positioned with short-term bullish sentiment, supported by improved U.S. government funding prospects. Therefore, the 15,646 and 15,737 resistance levels could act as levels of interest should the short-term bullish momentum persist.
However, traders could keep a keen eye on the 15,456 support level lower should the price action’s upward push falter.
Sources: TradingView, Trading Economics, Markit Economics, Reuters, Dow Jones Newswire.
