DAX 40 Edges Higher Despite a Pause in Global Stock Rally

• German ZEW Economic Sentiment Index Falls (Aug): -55.3 vs -53.8 exp.
• Germany Slaps Levy on Households to Spread Pain of Gas Surge.
• Rhine River Levels Remain a Concern.

DAX 40: Edges Higher Despite a Pause in Global Stock Rally

The DAX rose in European trade despite less impressive German ZEW sentiment data. The index is struggling to build on last week’s momentum as the week started on global growth concerns from China and was buoyed by a stronger-than-expected contraction in U.S. manufacturing activity.

The German government has confirmed that households will bear the brunt of rising energy prices, as gas costs will increase by around 290 euros a year. From October, consumers will have to pay an extra 2.419 euro cents per kilowatt-hour for natural gas. Temporary subsidies for some families softened the blow. On a positive note, Germany’s natural gas storage facilities are 76% full, according to the Federal Network Agency (BNetzA).

With the exception of HelloFresh SE (HFGG) which continued to rise after yesterday’s upbeat Q2 data, the German company had a subdued day. The group’s latest data beat expectations, with active customers up 4.1% year-on-year to 8 million. Crucially, the average order value in the US market accounted for just over half of the group’s total sales, which outpaced inflation by 14.2% even after adjusting for the euro’s weakness over the period. For the full year, the German group continues to expect adjusted earnings before interest, tax, depreciation and amortisation in a broad range of around 495 million euros. Shares hit a four-week high, rising 2.5% in the session.

With strong technical barriers above current prices, all eyes will be on the 14000 psychological level, which has numerous confluence points. At this point, a sustained upward breakout (daily or weekly candle close) seems unlikely.

DAX 40 Daily Chart – August 16, 2022

Technically, at the close of Friday’s weekly candle, we recorded 4 consecutive weeks of bullish price action and higher prices as bullish rallies gather momentum. The weekly candle closed without an upward wick, indicating that buyers are in control. Yesterday’s inside hanging man candlestick showed continued downward movement, underscoring the changing market sentiment. We are currently looking for a break above the trendline and key psychological level at 14000, which has multiple confluences including 61.8-76.4% Fib retracement levels, trendline resistance and the fact that we have been trading below it since The level June 10, 2022. We need the daily candle to close above the trendline to confirm an upside breakout.

DAX 40 1H Chart – August 16, 2022

On the 1-hour chart, we see an uptick from yesterday’s discussed support at 13740 before making a new high and closing above the trendline. Given this bullish momentum and 1H price action, we may see a repeat of yesterday’s decline followed by a resumption of upside momentum with the US session. I would be careful to break the 1H trend line as it is a daily trend line and needs a candle above the daily close to confirm. Immediate support lies at 13850-13830, which could present an opportunity for potential buyers, while a 1H candle close below 13830 would invalidate the bullish 1H structure and could lead to further declines.