DAX Falters on Slower China GDP and Trump Assassination Attempt

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China GDP YoY declined more than expected, economic expansion from the world’s second largest economy grew by 4.4%.

Forecasts had been for a 5.1% growth, down only slightly from last quarter’s reading of 5.3%. China is Germany’s biggest single trading partner, and the DAX index has benefited from German companies’ large exports.

A decline in the expansion of economic activity has stopped the rally that started yesterday with a 1.02% gain on the day. Later on today, Fed Chair Powell will give a speech, the market will be looking for more clues as to whether the central bank is on a path to cutting rates in September.

The attempt on Trump’s life has led many to believe the Republican nominee, to be confirmed today, will win the election for president. Initial concerns of higher tariffs on imports could lead to higher inflation seem to have dissipated.

On Friday, the ECB will have its monetary policy meeting, with the market widely expecting the central bank to keep rates on hold. The ECB president has reiterated that further cuts must be supported by data.

The current inflation rate is at 2.5%, down slightly from the previous reading of 2.6%, but still above the 2% target of the ECB.

Technical View

The day chart below for the DAX shows a market that has regained its bull trend. However, confirmation will be given once the price level goes above the all-time high of 18,913 (red line). Yesterday’s candle took the market above the Ichimoku cloud again, an initial bullish indication.

The next main resistance is at the ATH of 18,913, while support will be found on the previous high of 18,601 (black line), just below that, the cloud will offer support (green area). Should the market fail to rise higher, we me be looking at a head-and-shoulders setup.

This type of pattern, forming after a major bullish running could lead to a major correction. Still, it’s early yet, but worth keeping an eye on it.