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By Alejandro Zambrano, Cheif Market Strategist at InvestingCube and ATFX UK.
The DAX index has held up well, despite the US-China trade wars, the ongoing President Trump impeachment inquiry, and last week’s Euro Area Markit Composite PMI showing that the Euro area is flirting with recession levels.
I have been arguing that the DAX 30 should be trading lower, but it looks like the ample amount of “free money” in the global financial system, following the ECB introducing QE to “infinity”, and the Federal Reserve and China cutting interest rates, is seeking itself to stock market indices such as the DAX 30.
Traders and investors are pricing in that easy monetary policy by central banks will be enough to generate a soft landing in the world economy, and that is why investors are buying the DAX index today before the economic data indicators turn higher.
However, will investors be able to ignore a rising unemployment rate and negative NFPs? The sharp declines of leading economic indicators like the PMIs and the US ISM suggest that Friday’s NFP might be negative, while economists anticipate the US economy created 140,00 new jobs. If the reading prints lower, such as below 100,000, then that should be enough to send the unemployment rate higher. The reason why it is important is that the most significant highs in global stock markets have been met by a rising US unemployment rate. The 100,000 new jobs are what is needed to keep the unemployment rate unchanged, as 100,000 new workers are added to the workforce each month.
Technically, the DAX 30 is trading sideways within a large triangle pattern. The downward sloping trendlines go via the May 2018, June 2018, and July 2019 highs, while the upward sloping trendline goes via the 2019 and August 2019 lows. The index trading within the triangle shows that the markets are not convinced about the next step of the DAX 30, and as long as the price trades below the July 25 high of 12606 the DAX index might trade to the September 3 low of 11863, and lower. However, on a break to the July 25 high the price might try to reach the July 2018 high at 12887, followed by the May 2018 high at 13195. Time will tell what may happen next but the onus appears to be on the bulls.
Interact with Alejandro on Twitter, and for more analysis visit, InvestingCube.com.
DAX 30 Daily Chart
Alejandro Zambrano leads the team at InvestingCube.com and is also ATFX’s Global Chief Market Strategist. He combines extensive professional experience and a pragmatic attitude to trading, building clients’ understanding of the markets and the rationale behind investing. Before joining ATFX, Zambrano was the Chief Market Strategist of the FCA regulated broker, Amana Capital. Prior to that, he was also the Head Analyst at FXCM’s London research desk.
