The DAX Index fell by 1.47% on Friday as President Trump’s threat to impose tariffs on Mexico intensified fears over slowing global growth amidst escalating trade tensions with China. The index is vulnerable to world trade developments which have shown no signs of easing and should maintain market’s risk averse state as traders cautiously await retaliatory responses from China and Mexico. Meanwhile Germany’s gloomy economic performance was highlighted by soft inflation and a decline in retail sales data. Today, Germany and the Eurozone publish manufacturing PMI figures which will gain market attention and provide support should there be a marked improvement in the readings.
The DAX broke below the crucial support at 11800 and ended at 11726 as it traded well below the trend line support that channeled the index’s bullish trend since late December. The break below 11800 provides a bearish continuation signal that should drive the price to lower support levels at 11550 and 11500 should it break below the support at 11600. Moreover, the RSI reading has reached the oversold territory and exhibits a trend line resistance which may enable a higher move, once broken, towards resistance at 11810. So far the price has held below the 20-period MA currently at 11810 which should provide near term direction on the DAX and guard the resistance at 11925 which would negate the bearish outlook if overcome.