Panorama of the financial district in Frankfurt, Germany. Image source: bloodua © 123RF.com
Earlier today, the Markit institute released the highly anticipated German Services PMI numbers for October. The findings of the report demonstrated a bigger-than-expected hit on German industry.
The initial market forecasts were projecting a moderate slide to 49.6 points from September's 50.6. However, the deepening economic crisis has exacerbated the strained services sector, as the recorded PMI numbers fell to 48.9 index points.
Germany Services PMI. Image source: TradingEconomics.com
These concerning statistics come amidst steadily climbing COVID-19 cases in Germany and elsewhere in Europe, which is likely to further accelerate the adverse spillover effect from the pandemic on the general economic activity in the Eurozone.
While the crucially important global supply chains now seem more prepared to face the second coronavirus wave, it is yet to be seen whether the biggest economy in the Eurozone is in a better shape to face another wave of governmental lockdowns.
Arguably, the market has already started discounting the likelihood of another major downturn of the Eurozone's economy by the end of the year, which would bolster the overall pressure that is being exerted on the already strained industry sectors.
The most likely outcome from all of these developments would be more pressure for the euro in addition to another hit on the majority of European stocks. As can be seen on the 4H chart below, the price action of the German DAX index is already concentrated below the descending trend line (in red).
After the price broke down below the lower boundary of the Flag, the subsequent pullback was terminated below it, as the lower edge of the pattern has adopted a new role, that of a floating resistance. This is illustrative of the mounting bearish pressure in the short run.
The price action was able to recuperate from the major support at 12350.000 for a second time, but it is yet to be seen whether this level would hold on a likely third attempt.
DAX 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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