European Indices managed to recover from losses on Monday to start the month on a positive note. The German blue chip index rose by 0.56% on Monday as Manufacturing PMI figures out of Germany and the Eurozone were in line with estimates yet remain in contraction territory. Weak global demand has weighed on the manufacturing sector which is likely to show continued weakness as global trade tensions persist. Today the Eurozone releases preliminary inflation figures for May as well as the unemployment rate for April which are likely to impact price action during the day however the region’s gloomy economy outlook alongside trade concerns should keep markets in a risk averse state and limit gains unless provided with a good reason to be hopeful.
The DAX traded lower before reversing losses to end higher at 11792 on Monday. The index found support at 11600 from which it turned higher towards the resistance at 11800 as the RSI exited the oversold region. However gains remain capped as price has held below the 20-period MA currently at 11770 . Look for a sustained move below 11700 to indicate selling pressure and re-test the support at 11600 guarding the DAX from further declines towards the 11500 level. However, holding above 11700 would maintain buying pressure with a move above 11800 required to enable a brief recovery before the price turns lower to form a new low on its downtrend.