By IFCMarkets

Technical setup bullish for DE30

Germany’s economic data in the last couple of weeks painted a grim picture: consumer confidence plunged, contraction in private sector continued and business confidence deteriorated. Thus, the GfK consumer confidence index sank to negative 23.4 for May from 2.3 the previous month. Contraction accelerated in both German manufacturing and services sectors as evidenced by drops in Markit’s Manufacturing and Services PMIs for April, and Ifo Business Climate Index hit the lowest on record in April. At the same time the decline in annual inflation was smaller than expected: the inflation rate declined to 0.8% over year in April from 1.4% in March, when a drop to 0.6% was forecast. Weak German data are a downside risk for DE30. However German government announced two stimulus programs to aid its economy. On March 25 Germany passed a law establishing a program to lend out as much as $610 billion to companies to cushion the effects of the coronavirus. At the same time budget spending was increased by $172 billion. Against the background of countries gradually easing shutdowns similar fiscal and monetary stimulus programs of major economies boosted investor confidence which was translated into a rebound in stock markets. Recovering risk appetite is bullish for DE30.

Summary of technical analysis

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