DAX: German Economy Ministry Cuts GDP Forecast to -0.2% for 2024
The DAX lost 0.92% on Monday as the market loses momentum gained from Fed rate cut and China stimulus.
The DAX lost 0.92% on Monday as the market loses momentum gained from Fed rate cut and China stimulus.
German Minister of Finance, Christian Lindner, told journalists before a Eurogroup meeting that “We can’t be satisfied with the economic developments in Germany”. Adding that Germany’s economy had lost competitiveness over the past decade.
Earlier yesterday, the ministry of economics slashed the GDP forecast for 2024 to -0.2% from +0.3%. If the estimate is correct it would mark a second consecutive year of economic contraction in Europe’s largest economy.
The DAX lost 0.92% yesterday and is down 0.33% so far this morning in mixed trading. The poor performance is despite of today’s Industrial Production. Figures today showed a better-than-expected expansion of 2.9%, analysts’ forecasts were for an increase of 0.8%.
The good news that China released a stimulus package on Wednesday 25, has since faded as the market becomes skeptical of the performance of the German economy overall. The DAX had rallied to new all-time highs on the next day and Friday.
Over the two days following the announcement of the stimulus package the index rallied a combined 2.63%. Since its ATH of Friday, the index has lost 2.16%, which is also in line with major Eurozone indices.
Technical View
The day chart above shows the DAX in a major bull trend that has retraced from its recent ATH of 19,501 on Friday 27. Despite the technical view of a bull market, with prices well above the Ichimoku cloud, there are signs of weakness.
The indication of weakness comes from the RSI, which has failed to break above the level of 70 on the past 3 major rallies. The failure to break above 70 signals a weak rally that hasn’t managed to gain major momentum.
Today’s candle found support, so far, on the previous high of 18,913 (yellow line). Should that level break, the market will find support at 18,785 (blue line), and further down at 18,601 (black line).
To consider the bull trend as intact, we would need to see a close above the current ATH of 19,501. The most immediate resistance is at 19,057 (red line), which corresponds to a previous ATH.
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