Image source: Nataliya Hora © 123RF.com
The economic calendar for the week ahead is filled with crucial data releases that are going to shed light on the current status of the German economy.
Last Friday it was revealed that its Gross Domestic Product growth rate has remained flat at 0.00 per cent in Q4 of 2019, which increased investors’ fears of a potential structural recession.
This week on Tuesday, ZEW is scheduled to release its estimations on the most recent economic sentiment numbers in Germany, and on Friday its Markit’s turn to release crucial Manufacturing and Services PMI data.
All three factors are expected to have deteriorated in February, which is undoubtedly going to pressure the already strained German economy and the cautious investors’ in the Eurozone’s largest economy.
Consensus forecasts project marginal deterioration in investors’ confidence to be recorded on Tuesday, as a result of the global trade uncertainty and the spread of the novel coronavirus, which was dubbed COVID-19.
Thus, the ZEW economic sentiment index is expected to be revised down to 20.0 from the 26.7 index points that were observed in January.
Meanwhile, the flash manufacturing PMI is anticipated to edge lower from January’s high at 45.3 to 44.8 in February.
German Manufacturing PMI. Image source: TradingEconomics.com
The services PMI, too, is likely to register a moderate decline from January’s high at 54.2 to 53.9 in February.
Overall, the market experts project a very dim outlook on the German economic pressures to be recorded in February. Services, manufacturing and broad economic sentiment, are all anticipated to worsen this month.
Consequently, the initial impact of such poor results, if they are indeed realised, is going to be felt in the stock market first.
The German stocks index DAX is currently trading around 13770 points; however, the initial volatility that is likely to be caused by the release of the three economic reports could have a rippling effect on its price action.
The first major support level can be found at the 26.3 per cent Fibonacci Retracement at 13594.60, whereas the next crucial support can be found at the 38.2 per cent Fibonacci retracement at 13477.33.
DAX 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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