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The Market Movers
It was a mixed session for the auto sector. Mercedes-Benz Group and Volkswagen fell by 0.51% and 0.60%, respectively, with BMW and Continental AG ending the day down 0.22% and 0.11%, respectively. Porsche bucked the trend, gaining by 0.11%.
It was also a mixed session for the banks. Commerzbank slid by 1.65%, while Deutsche Bank gained 0.18%.
The Day Ahead for the DAX
This morning, economic indicators from China set the tone for the day, with Q2 GDP, industrial production, and retail sales drawing interest.
The Chinese economy expanded by 0.8% in the second quarter and by 6.3% year-over-year. Economists forecast the Chinese economy to grow by 7.3% year-over-year but by just 0.5% in the second quarter.
Industrial production and fixed asset investment numbers were hotter than expected. Industrial production increased by 4.4% year-over-year in June versus 3.5% in May. Fixed asset investments were up 3.8% in June versus 4.0% in May. Economists forecast industrial production and fixed asset investment to increase by 2.7% and 3.5%, respectively.
However, retail sales numbers disappointed, rising by 3.1% in June versus a forecasted 3.2% increase. In May, retail sales were up 12.7% year-over-year.
The markets took the year-on-year GDP miss as bearish, leaving the DAX futures in the red this morning.
It is a quiet day on the European calendar. Finalized inflation numbers for Italy are out but will unlikely influence market risk sentiment.
However, ECB commentary will need consideration. ECB President Christine Lagarde and Chief Economist Philip Lane are on the calendar to speak today with investors looking for post-summer forward guidance
It is a quiet day on the US economic calendar. NY Empire State Manufacturing numbers for July will be in focus. However, barring a sharp decline, we do not expect the report to influence market risk sentiment.
According to the ISM survey, the US manufacturing sector contracted for the eighth consecutive month in June. The numbers from New York State would have to be particularly weak to draw interest.
While the economic calendar is on the light side, there are no FOMC member speeches to consider. The Fed went into the blackout period on July 15.
DAX Technical Indicators
Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The DAX sat above the 50-day (15,943) and 200-day (15,846) EMAs, signaling bullish momentum over the near and longer term. Significantly, the 50-day EMA pulled away from the 200-day EMA, sending bullish signals and supporting a hold above the upper level of the 16,000 – 16,080 resistance band.
A continued hold above the 16,000 – 16,080 resistance band would bring the July high of 16,209 into play. However, central bank chatter must be DAX-friendly to support a bullish session as investors respond to the stats from China.
A fall through the upper level of the 16,000 – 16,080 resistance band would bring sub-16,000 and the 50-day EMA (15,943) into view.
The 14-4H RSI sits at 64.56, sending bullish signals. Significantly, the RSI aligns with the EMAs, supporting a run at the 16,209 July high.
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