Berlin, Germany. People wearing face masks on the street. Image source: Irina Pommer © 123RF.com
In December, inflation in Germany decreased by 0.3 per cent on a yearly basis, said the Federal Statistics Office earlier today. This performance was inlined with the initial market forecasts, which were anticipating the consumer prices in Germany to remain subdued.
This has been the fourth consecutive month of persisting deflation for the biggest economy in the Eurozone, just days before Germany is scheduled to release its industrial numbers for the same period.
Germany MoM Inflation Rate. Image source: TradingEconomics.com
In Germany, consumer sentiment remains muddled due to the country's deepening epidemic conditions, coupled with the somewhat slow rollout of COVID-19 vaccines. Meanwhile, the government is reluctant to ease the containment restrictions for the same reasons, which is weighing down on demand.
The Governing Council of the European Central Bank, which is meeting this Thursday, could cushion the coronavirus fallout on the German economic activity if it decides to scale up the scope of its Pandemic Emergency Long-Term Refinancing Operations (PELTROs) programme.
Meanwhile, German stocks opened today's trading session higher, despite the downbeat inflationary data. The DAX index started with a positive gap of nearly 0.50 per cent, as shown on the hourly chart below.
The price action managed to rebound above the 150-day MA (in purple) yesterday, following a temporary probing of the area below the moving average, before closing the session above the major support level at 13800.000.
Even though the DAX started trading today above the 100-day MA (in blue), for the time being, it remains concentrated below the descending channel's upper boundary, which means that the underlying bearish bias in the market remains prevalent.
The short-term momentum is promptly turning bullish, as elucidated by the MACD indicator, but that seems unlikely to jolt the evolving downswing. At any rate, the price action would have a difficult time ahead in shooting above the recent swing high just above the major resistance level at 14000.000. The latter bears significant psychological importance.
In contrast, another dropdown below the major support at 13800.000 would imply that the bears have regained full control and that the DAX would be ready to continue heading further down south, as argued in our recent analysis of the index.
DAX 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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